SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-27343
INFOCAST CORPORATION
(Exact name of Registrant as specified in its charter)
Nevada 84-1460887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Richmond Street West
Suite 902
Toronto, Ontario M5H 3W4
(416) 867-1681
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days / / Yes /X/ No
The number of shares outstanding of each of the issuer's classes of
common stock as of December 31, 1999:
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, $0.001 par value 19,054,943
<PAGE>
INFOCAST CORPORATION
INDEX
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 22
PART II. OTHER INFORMATION 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED BALANCE SHEET
[U.S. dollars, U.S. GAAP]
Unaudited
<TABLE>
<CAPTION>
As of As of
December 31, 1999 March 31, 1999
- -------------------------------------------------------------------------------------------------
ASSETS
Current
<S> <C> <C>
Cash and cash equivalents 2,893,102 3,092,445
Accounts receivable 203,844 19,416
Due from Applied Courseware Technology (A.C.T.) Inc. - 139,299
Due from Homebase Work Solutions Ltd. - 99,529
Prepaid expenses and other 485,670 21,404
- -------------------------------------------------------------------------------------------------
Total current assets 3,582,616 3,372,093
- -------------------------------------------------------------------------------------------------
Capital assets, net 2,529,319 107,392
Goodwill, net 5,104,694 -
Distribution and licensing rights, net [note 3 (b)] 2,975,000 500,000
Intellectual property, net 15,835,627 45,591
- -------------------------------------------------------------------------------------------------
30,027,256 4,025,076
- -------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 1,378,727 354,694
Current portion of obligations under capital leases 551,152 -
Due to directors, officers and stockholders 20,000 177,270
- -------------------------------------------------------------------------------------------------
Total current liabilities 1,949,879 531,964
- -------------------------------------------------------------------------------------------------
Obligation under capital lease 897,324 -
- -------------------------------------------------------------------------------------------------
Deferred income taxes 6,004,395 -
- -------------------------------------------------------------------------------------------------
Total liabilities 8,851,598 531,964
- -------------------------------------------------------------------------------------------------
Stockholders' equity
Common stock (100,000,000 authorized and 23,871,333 issued
and outstanding at December 31, 1999, 18,172,333 at
March 31, 1999) 22,371 16,672
Additional paid-in capital 49,071,505 16,925,017
Deferred compensation (2,017,532) (9,858,932)
Warrants 841,800 -
Accumulated other comprehensive loss 91,465 14,309
Accumulated development stage deficit (26,833,951) (3,603,954)
- -------------------------------------------------------------------------------------------------
Total stockholders' equity 21,175,658 3,493,112
- -------------------------------------------------------------------------------------------------
30,027,256 4,025,076
- -------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
[U.S. dollars, U.S. GAAP]
Unaudited
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months Cumulative from
ended ended ended ended inception to
December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999
- -----------------------------------------------------------------------------------------------------------------------------------
REVENUE
<S> <C> <C> <C>
Consulting revenue 10,866 - 10,866 - 57,820
Miscellaneous revenue 138,919 - 138,919 - 138,919
Interest income 49,898 - 108,362 - 112,840
- ---------------------------------------------------------------------------------------------------------------------------------
199,683 - 258,147 - 309,579
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Cost of sales 96,880 - 96,880 - 96,880
General, administrative and selling 1,457,036 297,597 5,480,357 332,808 6,538,947
Stock option compensation 2,397,510 - 11,904,058 - 14,160,996
Research and development 1,819,873 15,979 3,603,219 68,477 3,905,570
Interest and loan fees - - - - 23,562
Amortization 1,211,044 - 3,074,330 - 3,078,474
Depreciation 180,997 1,071 210,905 2,966 220,706
- ---------------------------------------------------------------------------------------------------------------------------------
7,163,340 314,647 24,369,749 404,251 28,025,135
- ---------------------------------------------------------------------------------------------------------------------------------
Net loss before income taxes (6,963,657) (314,647) (24,111,602) (404,251) (27,715,556)
Deferred income taxes (347,500) - (881,605) - (881,605)
- ---------------------------------------------------------------------------------------------------------------------------------
Net loss for the period (6,616,157) (314,647) (23,229,997) (404,251) (26,833,951)
Translation adjustment 28,903 8,314 77,156 20,518 91,465
- ---------------------------------------------------------------------------------------------------------------------------------
Comprehensive loss for the period (6,587,254) (306,333) (23,152,841) (383,733) (26,742,486)
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 22,141,582 1,500,000 22,141,582 1,021,306 8,481,764
- ---------------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per share $ (0.30) $ (0.21) $ (1.05) $ (0.40) $ (3.16)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF CASH FLOW
[U.S. dollars, U.S. GAAP]
Unaudited
<TABLE>
<CAPTION>
Nine months Nine months Cumulative from
ended ended inception to
December 31, 1999 December 31, 1998 December 31, 1999
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss for the period (23,229,997) (404,251) (26,833,951)
Add (deduct) items not affecting cash
Stock option compensation 11,904,058 - 14,160,996
Common stock issued for services 345,792 - 355,972
Warrants issued for services 615,000 - 615,000
Write-off in-process research & development 19,000 - 19,000
Write-off Applied Courseware Technology (A.C.T.) Inc. loan 98,685 - 98,685
Deferred income taxes (881,605) - (881,605)
Amortization 3,074,330 - 3,078,474
Depreciation 210,905 2,966 220,706
- -------------------------------------------------------------------------------------------------------------------
(7,843,832) (401,285) (9,166,723)
Changes in non-cash working capital balances
Accounts receivable (125,932) 26,094 (145,348)
Prepaid expenses and refundable deposits (462,799) (15,126) (484,203)
Bank overdraft - (9,263) -
Accounts payable and accrued liabilities 941,845 92,592 1,232,260
Due from InfoCast [the acquired entity] prior to acquisition - (25,020) (25,020)
- -------------------------------------------------------------------------------------------------------------------
Cash used in operating activities (7,490,718) (332,008) (8,589,034)
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of capital assets (1,163,891) (11,319) (1,281,606)
Distribution rights (2,475,000) - (2,975,000)
Due from Homebase Work Solutions Ltd. - - (99,529)
Acquisition of Homebase Work Solutions Ltd. 50,667 - 50,667
Due from Applied Courseware Technology (A.C.T.) Inc. - - (139,299)
Acquisition of InfoCast Corporation - - 87
- -------------------------------------------------------------------------------------------------------------------
Cash used in investing activities (3,588,224) (11,319) (4,444,680)
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in note payable to InfoCast [the acquired entity] - 250,000 250,000
Increase (decrease) in due to directors,
officers and shareholder (157,270) 95,130 (29,004)
Receipt of short-term unsecured loan - 70,000 470,000
Payment of short-term unsecured loan - (70,000) (470,000)
Cash advance from InfoCast [the acquired entity]
prior to acquisition - - 146,900
Cash Proceeds from issuance of share capital , net 10,970,537 2,373 15,478,463
- -------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 10,813,267 347,503 15,846,359
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash during the period (265,675) 4,176 2,812,645
Effects of foreign exchange rates change on cash balances 66,332 21,419 80,457
Cash & cash equivalents, beginning of period 3,092,445 - -
- -------------------------------------------------------------------------------------------------------------------
Cash & cash equivalents, end of period 2,893,102 25,595 2,893,102
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
[U.S. dollars, U.S. GAAP]
<TABLE>
<CAPTION>
Unaudited
Common Stock Additional
Common Issued and Paid-in Deferred
Shares outstanding Capital Compensation
# $ $ $
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding as of March 31, 1999 18,172,333 16,672 16,925,017 (9,858,932)
Deemed common shares issued for acquisition 3,400,000 3,400 16,996,600 -
of Homebase Work Solutions Ltd.
Common shares issued for cash 2,299,000 2,299 12,432,201 -
Share issuance costs- cash - - (1,463,963) -
Share issuance costs- warrants - - (226,800) -
Warrants issued for consulting services - - - (76,002)
Adjustments resulting from revaluation of stock options - - 1,352,500 711,829
granted to consultants in previous periods
Adjustments resulting from revaluation of common shares - - 119,700 38,223
granted to consultants in previous periods
Adjustments resulting from revaluation of warrants - - - (89,000)
granted to consultants in previous periods
Granting of stock options - - 3,627,780 (3,627,780)
Cancellation of stock options - - (691,530) 691,530
Amortization of deferred compensation - - - 10,192,600
Net loss for the period - - - -
Translation adjustment - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Outstanding as of December 31, 1999 23,871,333 22,371 49,071,505 (2,017,532)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Accumulated
other Accumulated Total
Comprehensive development Stockholders'
Warrants loss stage deficit Equity
$ $ $ $
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding as of March 31, 1999 - 14,309 (3,603,954) 3,493,112
Deemed common shares issued for acquisition - - - 17,000,000
of Homebase Work Solutions Ltd.
Common shares issued for cash - - - 12,434,500
Share issuance costs- cash - - - (1,463,963)
Share issuance costs- warrants 226,800 - - -
Warrants issued for consulting services 526,000 - - 449,998
Adjustments resulting from revaluation of stock options - - - 2,064,329
granted to consultants in previous periods - - - -
Adjustments resulting from revaluation of common shares - - - 157,923
granted to consultants in previous periods - - - -
Adjustments resulting from revaluation of warrants 89,000 - - -
granted to consultants in previous periods - - - -
Granting of stock options - - - -
Cancellation of stock options - - - -
Amortization of deferred compensation - - - 10,192,600
Net loss for the period - - (23,229,997) (23,229,997)
Translation adjustment - 77,156 - 77,156
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding as of December 31, 1999 841,800 91,465 (26,833,951) 21,175,658
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
December 31, 1999 Unaudited
1. BASIS OF ACCOUNTING
Nature of operations and continuing entity
These consolidated financial statements are the continuing financial statements
of Virtual Performance Systems Inc. ["VPS"] [a development stage company], an
Ontario corporation which was incorporated on July 29, 1997. VPS had a 100%
interest in, and subsequently amalgamated with, Cheltenham Technologies
Corporation, an Ontario corporation. VPS has a 100% interest in Cheltenham
Interactive Corporation ["Cheltenham Interactive"], an inactive Ontario
corporation, and Cheltenham Technologies (Bermuda) Corporation ["Cheltenham
Bermuda"], a Barbados corporation which owns certain intellectual properties. On
January 29, 1999, VPS acquired the net assets of InfoCast Corporation [formerly
Grant Reserve Corporation] ["InfoCast"], a United States non-operating company
traded on the NASDAQ OTC Bulletin Board which had a 100% interest in InfoCast
Canada Corporation ["InfoCast Canada"]. After the acquisition, the accounting
entity continued under the name of InfoCast Corporation.
InfoCast, InfoCast Canada, VPS, Cheltenham Interactive and Cheltenham Bermuda
are collectively referred to as the "Company". The Company is a development
stage technology company engaged in the research and development of information
delivery technologies.
The Company's primary operational focus as outlined in its business plan entails
significant investment in developing and marketing electronic commerce enabling
application solutions.
The aggregate future capital requirements to support this investment are
expected to be substantially funded from external resources including issuing
equity and or debt. There can be no assurance that any financing will be
available on terms acceptable to the Company or at all.
The Company believes that its cash as well as the additional proceeds of
$3,000,000 expected to be received by the Company from the completion of the
current Regulation S financing by the end of February 2000 will be sufficient to
support the Company's growth for approximately the next six months. In the event
the current Regulation S financing is not concluded, the Company will curtail
its development plans commencing February 2000 and reduce expense levels
materially. In such event the Company believes that its current cash reserves
will support limited activities until December 2000.
The Company is currently seeking to raise additional funds through private or
public financings, strategic or other relationships. In October 1999 the Company
entered into an agreement with N.M. Rothschild & Sons Canada Ltd. and N.M.
Rothschild & Sons (Washington) L.L.C. (together "Rothschild") pursuant to which
Rothschild is to assist the Company in raising up to $50 to $75 million over the
next six months.
The functional currency of VPS, Cheltenham Interactive, Cheltenham Bermuda and
InfoCast Canada is the Canadian dollar. However, for reporting purposes, the
Company has adopted the United States dollar as its reporting currency.
Accordingly, the Canadian dollar balance sheets of these companies have been
translated into United States dollars at the rates of exchange at the respective
period ends, while transactions during the periods and share capital amounts
have been translated at the weighted average rates of exchange for the
respective periods and the exchange rate at the date of the transaction,
respectively. Gains and losses arising from these translation adjustments are
included in comprehensive loss.
Acquisition of Homebase Work Solutions Ltd.
Pursuant to a share purchase agreement dated May 13, 1999, Homebase Work
Solutions Ltd. ["Homebase"] was acquired by the Company in consideration for
3,400,000 exchangeable shares of InfoCast Canada.
7
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
December 31, 1999 Unaudited
The InfoCast Canada exchangeable shares are convertible into InfoCast common
stock on a one-for-one basis at no additional consideration.
As a condition of the closing of the share purchase agreement, the Company paid
$141,561 [Cdn.$210,000] to officers of Homebase in May 1999 and an additional
$142,023 [Cdn.$210,000] in August 1999 to the officers of Homebase.
The acquisition has been accounted for using the purchase method. The value of
the acquisition was $17,077,000, which included $77,000 of expenses directly
attributable to the acquisition. For accounting purposes the exchangeable shares
of InfoCast Canada have been valued at $5.00 which is equal to the price per
share received from the June 1999 private placement of the Company's common
stock. The total purchase price of $17,077,000 has been allocated as follows:
$
- --------------------------------------------------------------------------------
Cash 127,667
Other current assets 13,565
Capital assets 20,465
Completed technology 17,015,000
In-process research and development 19,000
Trademarks 853,000
Workforce-in-place 253,000
Goodwill 5,846,293
Deferred income taxes (6,886,000)
Accounts payable and accrued liabilities (82,145)
Due to the Company (102,845)
- --------------------------------------------------------------------------------
Purchase price 17,077,000
- --------------------------------------------------------------------------------
The completed technology, trademarks, workforce in-place and goodwill will be
amortized over their respective useful lives of 5 years, 5 years, 3 years and 5
years. The in-process research and development was charged to income immediately
subsequent to the acquisition. The completed technology, trademarks and
workforce-in-place have been classified as intellectual property on the
consolidated balance sheet. The deferred income tax liability was created in
respect of the difference between the accounting and tax basis of the completed
technology, trademarks and workforce-in-place. The identification and the fair
values of the completed technology, in-process research and development,
trademarks and workforce-in-place were determined by management with the
assistance of an independent valuator.
The completed technology is comprised of Homebase's information hub, telework
and web-enabling technologies, together with the benefits of Homebase's
association with the National Environmental Policy Institute ("NEPI"). NEPI is a
United States based non-profit environmental lobbyist group that promotes
telework policies in the United States.
The results of operations of Homebase during the post-acquisition 233-day period
ended December 31, 1999 have been consolidated with those of the Company.
The following unaudited pro-forma consolidated financial information presents
certain statements of operations data of the Company as if the Company had
acquired Homebase as of April 1, 1998. This pro-forma financial information is
not necessarily indicative of the results that actually would have occurred had
the Company acquired Homebase on the date indicated or which would be obtained
in the future.
Nine months Nine months
Ended ended
December 31, 1999 December 31, 1998
$ $
- --------------------------------------------------------------------------------
Revenue 258,620 485
Net loss for the period (23,604,052) (3,069,127)
Basic and diluted loss per share (0.92) (0.69)
8
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
December 31, 1999 Unaudited
Change in year end
The Company changed its year end from December 31 to March 31.
Basis of presentation
These unaudited interim consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information. Accordingly, these unaudited interim
consolidated financial statements do not include all the financial information
required by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, all adjustments
[consisting of normal recurring accruals] considered necessary for fair
presentation have been included. The operating results for the nine-month period
ended December 31, 1999 may not be indicative of the operating results that will
occur for the year ended March 31, 2000.
2. SHARE CAPITAL
Authorized
The Company has 100,000,000 shares of preferred stock authorized at a par value
of $0.001 per share and has 100,000,000 shares of common stock authorized at a
par value of $0.001 per share.
Issued and outstanding common stock
<TABLE>
<CAPTION>
Common stock issued and
outstanding and
additional paid-in-capital
Shares Amount
# $
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding as of March 31, 1999 18,172,333 5,153,739
Acquisition of Homebase Work Solutions Ltd. 3,400,000 17,000,000
Private placement at $5.00 per share 420,000 2,100,000
Private placement at $5.50 per share 1,879,000 10,334,500
Share issuance costs -- (1,690,763)
- --------------------------------------------------------------------------------------------
Outstanding as of December 31, 1999 23,871,333 32,897,476
- --------------------------------------------------------------------------------------------
</TABLE>
Exchangeable shares
The number of shares of common stock outstanding as of December 31, 1999
includes 4,816,393 exchangeable shares of InfoCast Canada which have been deemed
as shares of common stock of the Company for accounting purposes because the
exchangeable shares are the economic equivalent of shares of common stock of the
Company.
9
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
December 31, 1999 Unaudited
Securities Purchase Agreement
Pursuant to a Securities Purchase Agreement dated June 24, 1999, the Company
issued, by way of a private placement, 420,000 shares of common stock at $5.00
per share for gross proceeds of $2,100,000, net of commissions of $210,000.
Also pursuant to the Securities Purchase Agreement, the Company issued warrants
to purchase 70,000 shares of common stock on June 24, 1999 to the placement
agent. Each warrant has an exercise price of $7.00, expires June 23, 2001 and
has been valued at $3.24 in the accounts based on an expected volatility factor
of 0.715 and a risk free interest rate of 5.1%. As a result, $226,800 was
charged to share issuance costs during the nine-month period ended December 31,
1999.
Private placement
From July to November 1999, the Company completed the private placement of
1,879,000 shares of common stock at $5.50 per share for gross proceeds of
$10,334,500 less an agent's fee of $1,033,329.
Stock options
As of December 31, 1999, 2,075,000 shares of common stock were reserved for the
exercise of stock options granted to various individuals involved in the
management of VPS, including 375,000 options granted to consultants, pursuant to
the Company's 1998 Stock Option Plan as amended on January 29, 1999. The options
were granted on February 8, 1999, are exercisable at a price of $1.00 per share,
expire three years from the date of grant and are subject to a vesting period of
at least six months. The closing market price of the Company's shares of common
stock on the date of grant was $6.625 per share. Of the 2,075,000 stock options
that were originally valued at $11,788,250, the deferred compensation
attributable to the 375,000 stock options that were granted to consultants was
originally determined based on the fair market value of the options on the date
of grant, $5.87 per option, and was revalued as of August 8, 1999 to the then
current fair value of $9.06 per stock option [based on a revised volatility of
1.019 and the August 8, 1999 closing market price of $10.00 per share of common
stock]. This revaluation resulted in a charge to stock option compensation
expense of $2,876,640 during the nine-month period ended December 31, 1999.
Stock compensation expense of $7,045,086 was charged to income during the
nine-month period ended December 31, 1999 in respect of the remaining 1,700,000
stock options granted to employees and directors that are accounted for
utilizing the intrinsic value method.
The directors and stockholders of the Company approved the 1999 Stock Option
plan under which an additional 2,000,000 stock options are eligible for grant.
As of December 31, 1999, 1,685,000 shares of common stock were reserved for the
exercise of stock options granted to various employees, officers, consultants
and advisors pursuant to the 1999 Stock Option Plan. Of the 1,180,500 options
originally granted on June 1, 1999 pursuant to the 1999 Stock Option Plan,
270,500 were cancelled in November 1999 leaving a balance of 910,000 outstanding
as of December 31, 1999. The options granted on June 1, 1999 are exercisable at
a price of $7.00 per share, expire five years from the date of grant and were
100% vested as of December 31, 1999. The closing market price of the Company's
shares of common stock on the date of grant was $7.00 per share, while the fair
value of the stock options granted was $2.16 per option utilizing a
Black-Scholes valuation model. Of the 910,000 stock options outstanding as of
December 31, 1999, 700,000 were granted to employees and 210,000 were granted to
consultants and advisors. The 210,000 outstanding stock options granted to
consultants and advisors have been valued at $527,100 which has been recognized
as a stock option compensation expense during the nine-month period ended
December 31, 1999. The deferred compensation in respect of the 700,000 stock
options granted to employees and directors was nil because the exercise price of
the options was equal to the market price of
10
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
December 31, 1999 Unaudited
the shares of common stock on the date of grant. On November 19, 1999, the
Company granted options to purchase 400,000 shares of common stock to employees
which are exercisable at a price of $7.00 per share, expire five years from the
date of grant and are subject to a vesting period from immediate to two years.
On December 8, 1999, the Company granted options to purchase an additional
375,000 shares of common stock to employees which are exercisable at a price of
$7.05 per share, expire five years from the date of grant and are subject to a
vesting period from immediate to two years. The deferred compensation in respect
of the stock options granted to employees on November 19, 1999 and 25,000 of the
stock options granted on December 8, 1999 was nil because the exercise price of
the options was equal to the market price of the shares of common stock on the
date of grant. The measurement date of the remaining 350,000 stock options
granted on December 8, 1999 will be January 4, 2000.
On June 1, 1999, the directors of the Company approved the grant of 750,000
stock options outside of the 1999 Stock Option Plan to an individual who became
an officer of the Company on September 4, 1999. The stock options are
exercisable at a price of $7.00 per share, expire five years from the date of
grant and vest as follows: 250,000 vested on September 4, 1999 upon the
acceptance by the individual of formal employment with the Company, 250,000 will
vest on September 4, 2000 and 250,000 will vest on September 4, 2001. These
outstanding options have been valued at $2,437,500 of which $1,402,315 has been
recognized as a stock option compensation expense during the nine-month period
ended December 31, 1999, and of which the balance of $1,035,185 has been
recorded as deferred compensation in stockholders' equity. The measurement date
in respect of these stock options was September 4, 1999
On October 18, 1999, the directors of the Company approved the grant of 60,000
stock options outside of the 1999 Stock Option Plan to an individual who is to
provide financial and investor relations consulting services to the Company. The
stock options are exercisable at a price of $8.25 per share, expire two years
from the date of grant and vest as follows: 15,000 on January 14, 2000, 15,000
on March 15, 2000, 15,000 on June 15, 2000 and 15,000 on September 15, 2000.
These outstanding options have been valued at $152,400 of which $52,917 has been
recognized as a stock option compensation expense during the nine-month period
ended December 31, 1999, and of which the balance of $99,483 has been recorded
as deferred compensation in stockholders' equity.
A summary of the Company's stock option activity is as follows:
<TABLE>
<CAPTION>
Nine Months Ended
December 31, 1999
Number of Weighted Average
Options Exercise Price
# $
<S> <C> <C>
Outstanding at March 31, 1999 2,075,000 1.00
Granted 2,765,500 7.03
Exercised - -
Forfeited - -
Cancelled 270,500 7.00
Outstanding at December 31, 1999 4,570,000 5.12
Exercisable as of December 31, 1999 2,143,336 4.83
</TABLE>
If the Company had been following FASB Statement No. 123 ["FASB 123"] in respect
of stock option granted to its employee and directors, the Company would have
recorded a higher stock option compensation expense for the nine month period
ended December 31, 1999 of $1,950,436 which results in a pro-forma net loss of
$25,180,433 and a pro-forma basic and diluted loss per share of $1.11 in respect
of the nine-month period ended December 31, 1999. The Company assumed an
expected dividend rate of 0%, an expected life of 0.75 years, a risk-free rate
of 5.10% and an expected volatility factor of 1.019 in respect
11
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
December 31, 1999 Unaudited
of the valuation of stock options granted under the 1998 Stock Option Plan in
accordance with FASB 123. The Company assumed an expected dividend rate of 0%,
an expected life of one year, a risk-free rate of 5.10% and an expected
volatility factor of 0.744 in respect of the valuation of stock options granted
under the 1999 Stock Option Plan to employees and stock options granted outside
of the 1999 Stock Option Plan on June 1, 1999 in accordance with FASB 123. The
Company assumed an expected dividend rate of 0%, an expected life of one year, a
risk-free rate of 6.10% and an expected volatility factor of 0.914 in respect of
the valuation of stock options granted under the 1999 Stock Option Plan to
consultants on June 1, 1999 in accordance with FASB 123. The Company assumed an
expected dividend rate of 0%, an expected life of one year, a risk-free rate of
6.10% and an expected volatility factor of 0.578 in respect of the valuation of
stock options granted outside of the 1999 Stock Option Plan on October 18, 1999
in accordance with FASB 123
Issuance of shares in consideration for consulting services
Pursuant to an agreement dated March 22, 1999, the Company issued 60,000 shares
of common stock to a financial investment-consulting firm on March 22, 1999 in
consideration for assistance in securing additional financing over the following
year. The measurement date for these shares of common stock will be March 22,
2000. For purposes of recognition of the cost of the shares prior to the
measurement date such shares are measured at their then current fair value at
each interim financial reporting date. These shares of common stock were
revalued as of December 31, 1999 to $7.625 each, which resulted in a charge to
general and administrative expense of $345,793 during the nine-month period
ended December 31, 1999. The remainder of $101,527 recorded as deferred
compensation in stockholders' equity.
Other warrants
Pursuant to a letter agreement dated May 20, 1999 with an investor relations
company and subsequent negotiations in October 1999, the Company will pay a
total of $75,000 and issue warrants to purchase 75,000 shares of common stock in
consideration for consulting services during the period from June 1, 1999 to May
31, 2000. The payments will be made and warrants issued for services in advance.
The following payments have been made and the following warrants have been
issued: $25,000 and 25,000 warrants on June 1, 1999 and $12,500 and 12,500
warrants on October 6, 1999. The Company plans to make additional payments and
issue additional warrants as follows: $12,500 and 12,500 warrants on January 1,
2000 and $25,000 and 25,000 warrants on March 1, 2000. Based on a volatility
factor of 0.963 and a risk-free interest rate of 5.10% , the Company valued the
25,000 warrants issued on June 1, 1999 with a purchase price of $7.00 per share,
at $149,750 which is the fair market value as of the August 31, 1999 measurement
date. Based on a volatility factor of 0.914 and a risk-free interest rate of
6.10%, the Company valued the 12,500 warrants issued on October 6, 1999 with a
purchase price of $8.75 per share, at $33,250 which is the fair market value as
of the November 30, 1999 measurement date. Each of the future warrants issued
under this agreement will have a purchase price equal to the market price on the
date granted. All warrants issued under this agreement will be exercisable on or
after June 1, 2000 and expire May 31, 2001. The Company charged $183,000 to
general and administrative expenses in respect of these warrants during the
nine-month period ended December 31, 1999.
On June 1, 1999, the Company issued warrants to purchase 200,000 shares of
common stock to parties in consideration for past consulting services to the
Company. These warrants have a purchase price of $7.00, are exercisable on or
after June 1, 2000 and expire May 31, 2001. These warrants have been valued at
$432,000 in the accounts based on a volatility factor of 0.744 and a risk-free
interest rate of 5.10% and have been charged to general and administrative
expenses.
12
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
December 31, 1999 Unaudited
3. COMMITMENTS
[a] Marketing agreement
Pursuant to an advertising services agreement dated July 14, 1999, the
Company will pay $14,435 [Cdn.$20,833] per month to an advertising agency
in consideration for the creation, production and placement of various
marketing and advertising initiatives. This agreement commenced July 1,
1999 and continues for a fixed term until May 1, 2000.
[b] Acquired distribution and licensing rights
Pursuant to a license agreement dated June 29, 1999, between the Company
and ITC Learning Corporation ["ITC"], the Company will become, for an
unlimited term, ITC's exclusive distance-learning technology partner for
the hosting and delivery of educational material utilizing the A-STAR
component within ITC's Workforce Initiative Program for total
consideration of $2,000,000. The consideration was paid by the Company
prior to December 31, 1999.
The Company also entered into a separate distribution agreement with ITC
in March 1999. This distribution agreement provided the Company with the
perpetual non-exclusive right to market, sell and electronically convert
all existing and future ITC products in consideration for $1,000,000 in
respect of electronic distribution to the first 150,000 licensed
purchasers. In the event that the Company effects distribution to more the
150,000 licensed purchasers, the Company and ITC will share the revenue
generated therefrom based on a revenue sharing formula. The total
consideration was subsequently reduced to $975,000 and was paid by the
Company in two installments in March and May 1999.
Acquired distribution and licensing rights are recorded at cost. The
capitalized costs of the distribution and licensing rights will be
amortized each period, commencing when the electronically converted
products and educational material are available for distribution and
license, at the greater of i) the amount calculated based on the
straight-line method over the estimated useful life of 5 years or ii) the
amount calculated based on the ratio of current gross revenues received
from the licensing of the electronically converted products and the
hosting and delivery of educational material over the sum of the current
and future gross revenues anticipated to be received by licensing the
electronically converted products and hosting and delivering the
educational material. If it is determined that investment in distribution
and licensing rights is not recoverable from estimated sales, the
distribution and licensing rights will be written down to their fair
value.
[c] Call Center Learning Solutions On-Line Inc. joint venture
Pursuant to an agreement dated May 18, 1999, between the Company and Call
Center Learning Solutions Inc. ["CCLS"], the two parties agreed to form a
new corporation, Call Center Learning Solutions On-Line Inc. ["CCLS
On-Line"] to be owned equally by the Company and CCLS. The new corporation
was to develop, own and exploit courseware in an electronic format capable
of electronic distribution. The Company funded the incorporation and
organization of the new corporation and all marketing and technical
support efforts of the new corporation from inception of the new
corporation. As of December 31, 1999 the Company had funded approximately
$178,000 of marketing expenses which the Company charged to income. In
January 2000, CCLS and the Company amicably agreed to terminate the
agreement.
13
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
December 31, 1999 Unaudited
[d] Lease agreement
Homebase entered into a lease agreement with Sun Microsystems on June 25,
1999 for the lease of a Sun Microsystems Enterprise 10000 computer. The
Company paid a deposit of $485,000 [Cdn.$700,000] at the time of signing.
The equipment was delivered on September 20, 1999 and under the terms of
the lease, 36 monthly lease payments of $41,015 [Cdn.$59,197] commenced in
the month following delivery of the equipment. The lease has been
accounted for as a capital lease.
[e] Innatrex Inc.
The Company entered into a letter of intent with Innatrex Inc. in August
1999 whereby the two parties will be evaluating the feasibility of call
center technology owned by Innatrex Inc. for readiness within the
application service provider market. The Company paid Innatrex a total of
$207,857 [Cdn.$300,000] between the signing of the letter of intent and
November 30, 1999. The Company expects to receive the payments back
through future revenue generated by the Company through the licensing of
this call center technology to third parties; otherwise this prepaid
amount will convert into equity in Innatrex Inc.
[f] CosmoCom, Inc.
Pursuant to a summary of terms and conditions for a definitive agreement
between the Company and CosmoCom, Inc. dated April 1999, the Company
intended to purchase licenses for CosmoCom Inc.'s CosmoCall software.
Under this summary, the Company placed an initial order for 300 licenses
for total consideration of $754,500. The Company has taken delivery of the
300 licenses and paid license fees of $275,650 in the nine-months ended
December 31, 1999. The balance of $478,850 will be paid in five monthly
installments beginning February 1, 2000. The Company charged $754,500 to
research and development expenses during the nine-month period ended
December 31, 1999.
[g] Investment banking and financial advisory services agreement
In October 1999 the Company entered into a non-exclusive investment
banking and financial advisory services agreement with N.M. Rothschild &
Sons Canada Ltd. and N.M. Rothschild & Sons (Washington) L.L.C. (together
"Rothschild") pursuant to which Rothschild's will provide financial
advisory services to the Company. In consideration for its services,
Rothschild is entitled to a monthly fee of $50,000 payable monthly in
arrears by the Company. Either party may terminate this agreement at any
time, with or without cause, by giving the other party 15 days written
notice.
[h] Shareholder agreement
Pursuant to a shareholder agreement executed on November 25, 1999 between
the Company, 813040 Alberta Ltd. ["Newco"] and Canpet Energy Group Inc.
["Canpet"], the Company and Canpet agreed to become shareholders of Newco,
with each party becoming a 50% owner of Newco. Newco is to develop a
web-enabled trading business model for crude oil and natural gas liquids
and other products. Initial funding for Newco will be by way of loans from
the shareholders. Under the agreement, the Company is to provide the
following: (i) $259,840 [Cdn.$375,000] as required by cash calls approved
by the Board of Directors of Newco, (ii) development, marketing and
technical expertise for the development and sales of products and services
marketed by Newco, (iii) temporary office space at the Company's existing
Calgary office location at a cost to be mutually agreed to by the Company
and Newco, and (iv) accounting and administrative support services until
such time as Newco's business develops to an adequate size to support a
dedicated staff.
14
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
December 31, 1999 Unaudited
As at December 31, 1999, the Company had advanced a total of $172,944
[Cdn.$249,595] to Newco in the form of shareholder loans which the Company
charged to prepaid expenses and other.
4. CONTINGENCIES
Fair value of financial instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments." The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies.
The fair values of financial instruments classified as current assets or
liabilities including cash and cash equivalents, accounts receivable and
accounts payable and accrued liabilities as of December 31, 1999 approximate the
carrying values due to the short-term maturity of the instruments.
Concentration of credit risk
The Company invests its cash and cash equivalents primarily with a major
Canadian chartered bank. Certain deposits, at times, are in excess of limits
insured by the Canadian government.
Note receivable from Cherokee Mining Company Inc.
Pursuant to an agreement dated November 23, 1998, as amended April 20, 1999, and
effective December 18, 1998, InfoCast [the acquired entity] sold its equity
interest in its two subsidiaries, Gold King Mines Corporation ["Gold King"] and
Madison Mining Corporation ["Madison Mining"] to Cherokee Mining Company Inc.
["Cherokee"], a company controlled by a former director of InfoCast, for [i] a
non-interest bearing note of $600,000 due November 25, 1999 and [ii] the
entitlement to 80% of the net proceeds received by Madison Mining and Gold King
in excess of $681,175 from the sale of their mining properties and assets.
InfoCast did not record a value on the $600,000 note receivable because of the
uncertainty of whether the management of Cherokee, Gold King and Madison Mining
would be able to sell the capital assets of Gold King and Madison Mining for
sufficient proceeds to enable the note to be repaid to InfoCast. As a result,
VPS did not reflect the note in the purchase equation upon the acquisition of
InfoCast in January 1999.
Pursuant to a Termination Agreement executed prior to December 31, 1999 (i) the
agreement dated November 23, 1998 was terminated, (ii) the non-interest bearing
note of $600,000 due November 25, 1999 was cancelled, (iii) Cherokee entered
into a purchase and sale agreement with Silver Wing Co. Inc. ["Silver Wing"]
pursuant to which Cherokee will sell the equity interest in Gold King and
Madison Mining to Silver Wing in consideration for, among other things, a
Promissory Note from Silver Wing for the principal sum of $250,000 plus interest
at a rate per annum equal to the Prime Rate, due on July 29, 2004, (iv) Cherokee
assigned to InfoCast the $250,000 Promissory Note from Silver Wing and (v)
Cherokee agreed to pay InfoCast $22,670. InfoCast received payment of the
$22,670 in December 1999 and credited this amount to income. InfoCast did not
record a value on the $250,000 promissory note receivable because of the
uncertainty of collection. In the event the promissory note is repaid, the
amount will be credited to income.
15
<PAGE>
InfoCast Corporation
[formerly Virtual Performance Systems Inc.] [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[U.S. dollars except where otherwise noted, U.S. GAAP]
December 31, 1999 Unaudited
Purchase of Applied Courseware Technology (A.C.T.) Inc.
Pursuant to a Letter of Intent dated February 10, 1999 between the Company and
Applied Courseware Technology (A.C.T.) Inc. ["ACT"], the Company intended to
purchase a 100% interest in ACT in consideration for [i] Cdn.$280,000 cash, [ii]
750,000 common shares of the Company and [iii] the assumption of ACT's
liabilities. Pursuant to subsequent negotiations, the Cdn.$280,000 cash
component of the purchase price was revised to nil. The transaction was subject
to satisfactory due diligence. The amount and terms of ACT's debt that would be
assumed by the Company upon its acquisition had not been determined.
In September 1999 the Company made the decision not to proceed with the
acquisition of ACT.
During the nine-month period ended December 31, 1999, the Company made cash
advances to ACT totaling $557,599 [Cdn.$ 823,629] to fund certain development
expenditures incurred on behalf of the Company. These advances in addition to
$47,390 [Cdn.$70,000] that was outstanding as of March 31, 1999 have been
charged to research and development expenses during the nine-month period ended
December 31, 1999.
In March 1999 the Company paid Cdn.$140,000 of ACT's debt in consideration for a
note secured by a general security agreement subject to prior charges. During
the nine-month period ended December 31, 1999, $95,242 [1998 - nil], including
interest receivable of $3,443, was written down to $nil and the note was
forgiven by the Company on January 7, 2000.
ACT had indicated to the Company that ACT believed the Company's decision to not
proceed with the acquisition was unlawful and that the Company had access to and
possessed intellectual property belonging to ACT that the Company had no right
to use or derive benefit from. ACT had indicated that they expected to commence
an action against the Company for damages.
On January 7, 2000 the Company reached a final settlement with the shareholders
of ACT. The Company agreed to pay $69,290 [Cdn.$100,000] in consideration for
certain capital assets and reimbursement of expenses incurred by ACT relating to
the purchase agreement, which amount was accrued for as at December 31, 1999.
The Company also agreed to issue 200,000 shares of common stock of the Company
to two shareholders of ACT.
5. SUBSEQUENT EVENT
Stock options
On February 1, 2000, the directors of the Company approved the grant of options
to purchase 175,000 shares of common stock under the 1998 Stock Option Plan to
an individual who is a consultant to the Company. These options are exercisable
at a price of $1.00 per share, expire on February 7, 2002 and vest on July 12,
2000.
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and are subject
to the safe harbor created thereby. These forward-looking statements can
generally be identified as such because the context of the statement will
include words such as the Company or we "believe," "anticipate," "estimate,"
"expect," "predict," "intend" or words of similar import as they relate to the
Company or the Company's management. Similarly, statements that describe the
Company's future plans, objectives or goals are forward-looking statements. The
Company's actual results may differ significantly from those projected in the
forward looking statements. Such forward looking statements involve risks and
uncertainties, including among other things, statements regarding the Company's
anticipated costs and expenses.
The consolidated financial statements of the Company are the
continuing financial statements of Virtual Performance Systems, Inc., a
development stage company and an Ontario corporation incorporated on July 29,
1997. Virtual Performance Systems had a 100% interest in, and subsequently
merged with, Cheltenham Technologies Corporation ("Cheltenham Technologies"), an
Ontario corporation. Virtual Performance Systems has a 100% interest in
Cheltenham Interactive Corporation ("Cheltenham Interactive"), an inactive
Ontario corporation, and Cheltenham Technologies (Bermuda) Corporation
("Cheltenham Bermuda"), a Barbados corporation that owns certain intellectual
property. On January 29, 1999, Virtual Performance Systems acquired the net
assets of the Company (formerly known as Grant Reserve Corporation), a United
States non-operating company traded on the Nasdaq OTC Bulletin Board, which had
a 100% interest in InfoCast Canada Corporation ("InfoCast Canada"). After the
acquisition, the accounting entity continued under the name of InfoCast
Corporation. InfoCast Corporation, InfoCast Canada, Virtual Performance Systems,
Cheltenham Technologies, Cheltenham Interactive and Cheltenham Bermuda are
collectively referred to in this section as the "Company."
The following discussion should be read in conjunction with the
Company's historical financial statements and notes thereto included elsewhere
in this quarterly report.
Overview
The Company is a development stage company that is in the process of
developing the infrastructure to enable it to host both Company-customized and
third-party software applications that can be accessed remotely by businesses
and their employees. This infrastructure will consist of: computer hardware
purchased from third parties; software applications; and communication
connections over private and public networks, including the Internet. The
Company plans to provide its customers with access to its infrastructure and
hosted applications on a per use basis. Companies providing such services have
recently come to be known as application service providers or "ASPs."
The Company has incurred operating losses since its inception in
July 1997. The Company has not yet had any significant product or service sales
on a commercial basis. The Company has sustained itself through the sale of its
common stock and warrants to purchase common stock in a series of private
placements and shareholder loans. On a long term basis, the Company will need to
raise additional funds through private or public financings, strategic or other
relationships. There can be no assurance that such funds will be available on
commercially reasonable terms in the future.
The Company acquired HomeBase Work Solutions in May 1999 in exchange
for 3,400,000 shares of InfoCast Canada, which shares are exchangeable into
common stock of the Company. The HomeBase Work Solutions acquisition provided
the Company with the core technology for its information hub strategy. The
acquisition also introduced the telework application and third-party application
hosting initiatives to the Company, both of which will be hosted on the
Company's information hub. The virtual call center application and distance
learning library being developed by the Company will also be hosted on the
information hub.
The Company changed its fiscal year end from December 31 to March
31. Therefore, financial statements have been prepared for the three month
transition period ended March 31, 1999.
17
<PAGE>
Results of Operations
Nine months ended December 31, 1999 vs. nine months ended December 31, 1998
Consulting revenue increased from zero for the nine months ended
December 31, 1998 to $10,866 for the nine months ended December 31, 1999 as the
Company performed miscellaneous consulting services during the period ended
December 31, 1999.
Miscellaneous revenue increased from zero for the nine month period
ended December 31, 1998 to $138,919 for the nine month period ended December 31,
1999. This increase is primarily due to revenue received from a customer related
to the sale of computer equipment.
Interest income increased from zero for the nine months ended
December 31, 1998 to $108,362 for the nine months ended December 31, 1999. The
proceeds received from the private placements in 1999 were invested in short
term deposits which generated interest income for the Company during the nine
month period ended December 31, 1999, consistent with the Company's investment
policy.
Cost of sales increased from zero for the nine month period ended
December 31, 1998 to $96,880 for the nine month period ended December 31, 1999.
The costs incurred in the nine month period ended December 31, 1999 represent
the direct cost related to the sale of computer equipment recognized as
miscellaneous revenue, as discussed above.
General, administrative and selling expenses increased from $332,808
for the nine months ended December 31, 1998 to $5,480,357 for the nine months
ended December 31, 1999. The consolidation of the operations of HomeBase Work
Solutions for the period May 13, 1999 to December 31, 1999 accounted for
$245,000 of the increase. The Company incurred expenses of $284,000 related to
the HomeBase Work Solutions acquisition in the form of incentive compensation
paid to three key officers of HomeBase Work Solutions. The Company had eight
more employees involved in general, administrative and selling functions in the
nine month period ended December 31, 1999 than for the same period ended
December 31, 1998, contributing approximately $306,700 to the increase in
expenses. The Company paid consulting fees to an additional six consultants
during the nine month period ended December 31, 1999 compared to the same period
ended December 31, 1998, contributing approximately $1,046,200 to the increase
in general, administrative and selling expenses. Investor relations costs of
$1,021,000 were incurred for the nine month period ended December 31, 1999.
Additional rent expenses of $204,000 were incurred for the two U.S. offices that
were not open in September 1998 and the expanded Toronto office space. The
Company expensed $615,000 for warrants issued for services during the nine month
period ended December 31, 1999 and expensed an additional $345,800 related to
common stock issued for services during the nine month period ended December 31,
1999. The Company incurred sales and marketing expenses related to the Call
Center Learning Solutions On-Line Inc.
joint venture of $178,000 during the nine month period ended December 31, 1999.
Stock option compensation expense increased from zero for the nine
months ended December 31, 1998 to $11,904,058 for the nine months ended December
31, 1999. This increase is due to the amortization of the deferred compensation
amount resulting from the grant of stock options to various individuals involved
in the management of the Company.
Research and development expenses increased from $68,477 for the
nine months ended December 31, 1998 to $3,603,219 for the nine months ended
December 31, 1999. This increase is primarily due to continued efforts to
develop and expand the Company's product offerings. The Company incurred
expenses of approximately $605,000 from the write off of advances made to
Applied Courseware Technology Inc. ["ACT"] which had been used to fund
development expenses related to the electronic conversion of courseware in the
nine month period ended December 31, 1999. The Company also wrote off a $95,000
receivable from ACT to research and development expense during the ninth month
period ended December 31, 1999. The consolidation of the operations of HomeBase
Work Solutions for the period May 13, 1999 to December 31, 1999 accounted for
$1,058,800 of the increase. The Company incurred expenses of $754,500 related to
software licenses purchased for its virtual call center application. The Company
had eight more employees involved in research and development functions in the
nine month period ended December 31, 1999 than for the same period ended
December 31, 1998, contributing approximately $376,400 to the increase in
expenses. The Company paid consulting fees to an additional six consultants
during the nine month period ended December 31, 1999 compared to the same period
ended December 31, 1998, contributing approximately $174,000 to the increase in
research and development expense.
18
<PAGE>
Amortization expenses increased from zero for the nine months ended
December 31, 1998 to $3,074,330 for the nine months ended December 31, 1999.
Amortization of the acquired intellectual property and goodwill resulting from
the acquisition of HomeBase Work Solutions accounted for the majority of the
increase in the amortization expense for the period.
Depreciation expenses increased from $2,966 for the nine months
ended December 31, 1998 to $210,905 for the nine months ended December 31, 1999.
This increase is a result of the acquisition of additional capital assets
between January 1, 1999 and December 31, 1999.
Deferred income taxes increased from zero for the nine months ended
December 31, 1998 to $881,605 for the nine months ended December 31, 1999 as a
result of the draw down of the deferred income tax liability created by the
purchase of HomeBase Work Solutions by the Company in respect of the difference
in the tax and accounting basis of various intellectual property assets.
Three months ended December 31, 1999 vs. three months ended December 31, 1998
Consulting revenue increased from zero for the three months ended
December 31, 1998 to $10,866 for the three months ended December 31, 1999 as the
Company performed miscellaneous consulting services during the period ended
December 31, 1999.
Miscellaneous revenue increased from zero for the three month period
ended December 31, 1998 to $138,919 for the three month period ended December
31, 1999. This increase is primarily due to revenue received from a customer
related to the sale of computer equipment.
Interest income increased from zero for the three months ended
December 31, 1998 to $49,898 for the three months ended December 31, 1999. The
proceeds received from the private placements in 1999 were invested in short
term deposits which generated interest income for the Company during the three
month period ended December 31, 1999, consistent with the Company's investment
policy.
Cost of sales increased from zero for the three month period ended
December 31, 1998 to $96,880 for the three month period ended December 31, 1999.
The costs incurred in the three month period ended December 31, 1999 represent
the direct cost related to the sale of computer equipment recognized as
miscellaneous revenue, as discussed above.
General, administrative and selling expenses increased from $297,597
for the three months ended December 31, 1998 to $1,457,036 for the three months
ended December 31, 1999. The consolidation of the operations of HomeBase Work
Solutions for the period May 13, 1999 to December 31, 1999 accounted for $98,000
of the increase. The Company had eight more employees involved in general,
administrative and selling functions in the three month period ended December
31, 1999 than for the same period ended December 31, 1998, contributing
approximately $176,500 to the increase in expenses. The Company paid consulting
fees to the same number of consultants during the three month period ended
December 31, 1999 compared to the same period ended December 31, 1998, however
consulting fees were approximately $144,000 higher during the three month period
ended December 31, 1999. Investor relations costs of $366,500 were incurred for
the three month period ended December 31, 1999. Additional rent expenses of
$49,000 were incurred for the two U.S. offices that were not open in September
1998 and the expanded Toronto office space. The Company expensed $20,000 for
warrants issued for services during the three month period ended December 31,
1999 and expensed an additional $92,000 related to common stock issued for
services during the three month period ended December 31, 1999. The Company
incurred sales and marketing expenses related to the Call Center Learning
Solutions On-Line Inc. joint venture of $75,000 during the three month period
ended December 31, 1999.
Stock option compensation expense increased from zero for the three
months ended December 31, 1998 to $2,397,510 for the three months ended December
31, 1999. This increase is due to the amortization of the deferred compensation
amount resulting from the grant of stock options to various individuals involved
in the management of the Company.
Research and development expenses increased from $15,979 for the
three months ended December 31, 1998 to $1,819,873 for the three months ended
December 31, 1999. This increase is primarily due to continued efforts to
develop and expand the Company's product offerings. The Company incurred
expenses of approximately $605,000 from the write off of advances made to ACT
which had been used to fund development expenses related to the electronic
conversion of courseware in the three month
19
<PAGE>
period ended December 31, 1999. The Company also wrote off a $95,000 receivable
from ACT to research and development expense during the three months ended
December 31, 1999. The consolidation of the operations of HomeBase Work
Solutions for the three month period ended December 31, 1999 accounted for
$553,500 of the increase. The Company incurred expenses of $754,500 related to
software licenses purchased for its virtual call center application. The Company
had twelve more employees involved in research and development functions in the
three month period ended December 31, 1999 than for the same period ended
December 31, 1998, contributing approximately $256,000 to the increase in
expenses. The Company paid consulting fees to one additional consultant during
the three month period ended December 31, 1999 compared to the same period ended
December 31, 1998, contributing approximately $16,000 to the increase in
research and development expense.
Amortization expenses increased from zero for the three months ended
December 31, 1998 to $1,211,044 for the three months ended December 31, 1999.
Amortization of the acquired intellectual property and goodwill resulting from
the acquisition of HomeBase Work Solutions accounted for the majority of the
increase in the amortization expense for the period.
Depreciation expenses increased from $1,071 for the three months
ended December 31, 1998 to $180,997 for the three months ended December 31,
1999. This increase is a result of the acquisition of additional capital assets
between January 1, 1999 and December 31, 1999.
Deferred income taxes increased from zero for the three months ended
December 31, 1998 to $347,500 for the three months ended December 31, 1999 as a
result of the draw down of the deferred income tax liability created by the
purchase of HomeBase Work Solutions by the Company in respect of the difference
in the tax and accounting basis of various intellectual property assets.
Liquidity and Capital Resources
Inception to December 31, 1999
At December 31, 1999, the Company had cash and cash equivalents of
$2,893,102 and working capital of $1,632,737. The Company's cash and cash
equivalent position has been generated through a series of equity offerings net
of development stage expenditures. The Company has not yet generated any
significant revenues.
From its inception on July 29, 1997 to January 29, 1999, Virtual
Performance Systems issued 3,624,100 shares of Common Stock for cash proceeds of
Cdn.$3,732 (or $2,540 in U.S. dollars as of September 30, 1999). Pursuant to the
reverse takeover transaction on January 29, 1999, the shareholders of Virtual
Performance Systems sold their 100% interest in Virtual Performance Systems to
the Company in consideration for 1,500,000 shares of InfoCast Canada, which
shares are exchangeable into Common Stock of the Company for no additional
consideration. Such exchangeable shares have been deemed as shares of Common
Stock of the Company because they are the economic equivalent of the Company's
Common Stock. At the time of the reverse takeover, the Company (formerly Grant
Reserve Corporation) had 13,580,000 shares of Common Stock outstanding which
continued as shares of Common Stock of the continuing entity. Subsequent to the
reverse takeover and up to December 31, 1999, the Company issued 3,023,333
shares of Common Stock at $1.50 per share in a private placement in March 1999,
60,000 shares of Common Stock in consideration for consulting services in March
1999, 420,000 shares of Common Stock at $5.00 per share in a private placement
in June 1999 and 1,879,000 shares of Common Stock at $5.50 per share in a
private placement from July 1999 to November 1999. The Company has raised
$15,478,400 from these private placements, net of share issuance costs.
From its inception, the Company has used $9,167,000 for operating
activities before changes in non-cash working capital balances mainly as a
result of general, administrative and selling and research and development
expenditures, net of incidental revenues. The Company used a further $1,282,000
for the purchase of capital assets, $2,975,000 on the purchase of distribution
rights and $484,000 on the placement of deposits.
The Company relied on term loans from shareholders, directors and
officers during the period from its inception to the completion of the March
1999 private placement to fund its operations. These loans were repaid as at
June 30, 1999 from the proceeds of the private placements.
The Company is currently raising funds through a private placement
of its shares of Common Stock. The Company may issue up to an additional 500,000
shares of Common Stock for an aggregate
20
<PAGE>
offering price of $3,000,000 in such offering. The Company expects to use its
existing cash and cash equivalents along with these proceeds for the following:
o The Company plans to continue to invest in the research
and development of its telework and information hub
products and services and anticipates spending
approximately $4,800,000 on these efforts from January
1, 2000 to December 31, 2000. The Company anticipates
that it will begin earning revenue and collecting cash
from sales of the telework and information hub products
and services before the end of the current fiscal year
which will help fund the cash requirements of this
division but there can be no assurance that it will do
so.
o The Company will use approximately $1,000,000 from
January 1, 2000 to December 31, 2000 to enhance and
complete the development of its virtual call center
application.
o The Company expects to use approximately $400,000 from
January 1, 2000 to May 31, 2000 in the development and
electronic conversion of courseware for the distance
learning application.
o The Company will use the remaining capital resources to
fund possible complementary acquisitions, develop new
technologies, and other corporate and working capital
needs.
The Company believes that its existing cash as well as the
additional proceeds of up to $3,000,000 expected to be received by the Company
from the completion of the current Regulation S financing by the end of February
2000 will be sufficient to support the Company's growth for approximately the
next six months. Based on its current plans, the Company anticipates that it
will begin generating revenue within the next three months. This revenue is
expected to provide the Company with additional cash resources to support the
Company's development until approximately September 2000. In the event the
current Regulation S financing is not concluded, the Company will curtail its
development plans commencing in February 2000 and reduce expense levels
materially. In such event, the Company believes that its current cash reserves
will support limited activities until December 2000. The Company will be
required to seek additional funds and there can be no assurance that any
financing will be available on terms acceptable to the Company or at all.
On a long term basis, the Company will need to raise additional
funds through private or public financings, strategic or other relationships. In
October 1999, the Company entered into an agreement with Rothschild pursuant to
which Rothschild is to assist the Company in raising up to $50 to $75 million
over the next six months. There can be no assurance that the Company will be
able to raise any additional funds.
Inflation has not been a major factor in the Company's business. There can be no
assurances that this will continue.
Year 2000 Compliance
Prior to January 1, 2000, there was a great deal of concern
regarding the ability of computers to adequately distinguish 21st century dates
from 20th century dates due to the two-digit date fields used by many systems.
Most reports to date, however, are that computer systems are functioning
normally and the compliance and remediation work accomplished leading up to 2000
was effective to prevent any problems.
To date the Company has not experienced such problems. Computer
experts have warned, however, that there may still be residual consequences of
the change in centuries. For example, some software programs may have difficulty
resolving the so-called "century leap year" algorithm which will occur during
the Year 2000. Any such residual consequences could result in hardware failure,
the corruption or loss of data contained in the Company's internal information
system, and failures affecting the Company's key vendors, suppliers or
customers. This in turn may lead to legal action, and may otherwise also have a
material adverse effect on the Company's business, results of operations or
financial condition.
21
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to immaterial levels of market risks with
respect to changes in foreign currency exchange rates and interest rates. Market
risk is the potential loss arising from adverse changes in market rates and
prices, such as foreign currency exchange and interest rates. To the extent that
the Company consummates financings outside of Canada, the Company receives
proceeds in currency other than the Canadian dollar. Most of the Company's
operating expenses are incurred in Canadian dollars. Thus, the Company's results
of operations will tend to be adversely affected if there is a strong Canadian
dollar. The Company does not enter into derivatives or other financial
instruments for trading or speculative purposes, nor does it enter into
financial instruments to manage and reduce the impact of changes in foreign
currency exchange rates.
While the Company seeks to place its and cash equivalents with high
credit-quality financial institutions, the Company is still exposed to credit
risk for uninsured amounts held by such institutions.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
From October 1 to December 31, 1999, the Company issued 159,000
shares of Common Stock in a private placement financing for an aggregate
offering price of $874,500 less commissions of $87,450 pursuant to Regulation S
of the Securities Act of 1933, as amended.
In October 1999, 83,607 exchangeable shares of InfoCast Canada were
exchanged into 83,607 shares of common stock of the Company. These exchangeable
shares were issued on January 29, 1999 as part of the acquisition of Virtual
Performance Systems, Inc.
In October 1999, the Company issued options to purchase 60,000
shares of common stock at an exercise price of $8.25 per share to Howard Nichol,
an investor relations consultant, for services which included assisting the
Company with communications with and presentations to stock brokers, analysts
and private and institutional investors, providing access to the financial media
and introductions to potential acquisition or alliance opportunities.
On November 19, 1999, the Company issued options to purchase an
aggregate of 400,000 shares of Common Stock at an exercise price of $7.00 per
share to Carl Stevens, Christopher Rouse and Jennifer Scoffield, officers of the
Company, under the 1999 Stock Option Plan.
On December 8, 1999, the Company issued options to purchase an
aggregate of 375,000 shares of Common Stock at an exercise price of $7.05 per
share to Herve Seguin, the Company's Chief Financial Officer, and three
employees of the Company.
22
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation, as amended, of the Company. (Incorporated
by reference from Exhibits to the Company's Registration Statement
on Form 10, File No. 0-27343)
3.2 Amended and Restated Bylaws of the Company. (Incorporated by
reference from Exhibits to the Company's Registration Statement on
Form 10, File No. 0-27343)
4.14 Warrant to Purchase 12,500 shares of Common Stock dated January 1,
2000 issued to The Ponetz Group
10.38 Service Provider Agreement dated as of December 9, 1999 by and
between the Company and Sun Microsystems of Canada, Inc.
10.39 Heads of Agreement dated December 17, 1999 by and between the
Company and InfoCast (Australasia) Limited.
10.40 Minutes of Settlement Agreement dated January 7, 2000 between
Applied Courseware Technology Inc., Gerard Costello, Faye Costello,
Joseph Costello, InfoCast Canada Corporation and the Company.
10.41 Full and Final Release dated January 6, 2000 by and among the
Company, InfoCast Canada Corporation and Stephen Headford.
10.42 Release dated January 7, 2000 by and among the Company, InfoCast
Canada Corporation, Applied Courseware Technology, Inc., Gerard
Costello, Faye Costello and Joseph Costello.
10.43 Release dated January 7, 2000 by and among the Company, InfoCast
Canada Corporation, Applied Courseware Technology, Inc., Gerard
Costello, Faye Costello and Joseph Costello.
10.44 Termination Agreement dated July 29, 1999 between the Company and
Cherokee Mining Company Inc.
10.45 Assignment of Promissory Note dated July 29, 1999 by and between the
Company and Cherokee Mining Company, Inc.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None
23
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
InfoCast Corporation
Date: February 11, 2000 By: /s/ Herve Seguin
-------------------------------
Herve Seguin
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
24
NEITHER THIS WARRANT NOR THE COMMON STOCK WHICH MAY BE ACQUIRED UPON THE
EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT THERETO UNDER THE ACT AND COMPLIANCE WITH ANY APPLICABLE
STATE SECURITIES LAW, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
VOID AFTER 5:00 P.M. EASTERN TIME, JANUARY 1, 2002.
For the Purchase of
12,500 shares of
Common Stock
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK
OF
INFOCAST CORPORATION
(A Nevada corporation)
Infocast Corporation, a Nevada corporation (the "Company"), hereby
certifies that for value received, The Poretz Group (the "Registered Holder"),
residing at 1650 Tysons Boulevard, McLean, Virginia 22102, is entitled, subject
to the terms set forth below, to purchase from the Company, pursuant to this
Warrant ("Warrant"), at any time or from time to time on or after October 6,
2000, and at or before 5:00 p.m., Eastern Time, January 1, 2002 ("Expiration
Date"), but not thereafter, 12,500 shares of Common Stock, $.001 par value, of
the Company ("Common Stock"), at a purchase price (the "Purchase Price") equal
to $7.62 per share of Common Stock. The number of shares of Common Stock
purchasable upon exercise of this Warrant, and the purchase price per share,
each as adjusted from time to time pursuant to the provisions of this Warrant,
are hereinafter referred to as the "Warrant Shares" and the "Purchase Price,"
respectively.
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, in
whole or in part, by the surrender of this Warrant (with the Notice of Exercise
Form attached hereto as Exhibit I duly executed, completed and delivered by such
Registered Holder) at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment in full,
in lawful money of the United States, of an amount equal to the then applicable
<PAGE>
Purchase Price multiplied by the number of Warrant Shares then being purchased
upon such exercise. If the rights represented hereby shall not be exercised at
or before 5:00 p.m., Eastern Time, on the Expiration Date, this Warrant shall
become and be void and without further force or effect, and all rights
represented hereby shall cease and expire.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in subsection
l(a) above. At such time, the person or persons in whose name or names any
certificates for Warrant Shares shall be issuable upon such exercise as provided
in subsection I (c) below shall be deemed to have become the holder or holders
of record of the Warrant Shares represented by such certificates.
(c) As soon as practicable after the exercise of the purchase
right represented by this Warrant, the Company at its expense will use its best
efforts to cause to be issued in the name of the Registered Holder and delivered
to you:
(i) a certificate or certificates for the number of
full shares of Warrant Shares to which such Registered Holder shall be entitled
upon such exercise plus, in lieu of any fractional share to which such
Registered Holder would otherwise be entitled, a Warrant Share representing the
remainder of the fractional share to the next whole Warrant Share, and
(ii) in case such exercise is in part only, a new
warrant or warrants (dated
the date hereof) of like tenor, stating on the face or faces thereof the number
of shares currently stated on the face of this Warrant minus the number of such
shares purchased by the Registered Holder upon such exercise as provided in
subsection l(a) above.
2. Adjustments.
(a) Split, Subdivision or Combination of Shares. If the
outstanding shares of the Company's Common Stock at any time while this Warrant
remains outstanding and unexpired shall be subdivided or split into a greater
number of shares, or a dividend in Common Stock shall be paid in respect of
Common Stock, or a similar change in the Company's capitalization occurs which
affects the outstanding Common Stock, as a class, then the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall, simultaneously with the effectiveness of such subdivision or
split or immediately after the record date of such dividend (as the case may
be), be proportionately decreased. If the outstanding shares of Common Stock
shall be combined or reverse-split into a smaller number of shares, the Purchase
Price in effect immediately prior to such combination or reverse split shall,
simultaneously with the effectiveness of such combination or reverse split, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Shares purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such
-2-
<PAGE>
adjustment, multiplied by the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) Reclassification, Reorganization, Consolidation or Merger.
In the case of any reclassification of the Common Stock or any reorganization,
consolidation or merger of the Company with or into another corporation (other
than a merger or reorganization with respect to which the Company is the
continuing corporation and which does not result in any reclassification of the
Common Stock), or a transfer of all or substantially all of the assets of the
Company, or the payment of a liquidating distribution then, as part of any such
reorganization, reclassification, consolidation, merger, sale or liquidating
distribution, the Company shall arrange for the other party to the transaction
to agree to, and lawful provision shall be made, so that the Registered Holder
of this Warrant shall have the right thereafter to receive upon the exercise
hereof (to the extent, if any, still exercisable), the kind and amount of shares
of stock or other securities or property which such Registered Holder would have
been entitled to receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution, as
the case may be, such Registered Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of this Warrant. In any such
case, appropriate adjustment (as reasonably determined by the Board of Directors
of the Company) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the Registered
Holder of this Warrant such that the provisions set forth in this Section 2
(including provisions with respect to the Purchase Price) shall thereafter be
applicable, as nearly as is reasonably practicable, in relation to any shares of
stock or other securities or property thereafter deliverable upon the exercise
of this Warrant.
3. Limitation on Sales. Each holder of this Warrant acknowledges that
this Warrant and the Warrant Shares have not been registered under the
Securities Act of 1933, as now in force or hereafter amended, or any successor
legislation (the "Act"), and agrees not to sell, pledge, distribute, offer for
sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued
upon its exercise in the absence of (a) an effective registration statement
under the Act as to this Warrant or such Warrant Shares and registration or
qualification of this Warrant or such Warrant Shares under any applicable Blue
Sky or state securities law then in effect or (b) an opinion of counsel,
satisfactory to the Company, that such registration and qualification are not
required. Without limiting the generality of the foregoing, unless the offering
and sale of the Warrant Shares to be issued upon the particular exercise of the
Warrant shall have been effectively registered under the Act, the Company shall
be under no obligation to issue the shares covered by such exercise unless and
until the Registered Holder shall have executed an investment letter in form and
substance satisfactory to the Company, including a warranty at the time of such
exercise that it is acquiring such shares for its own account, and will not
transfer the Warrant Shares unless pursuant to an effective and current
registration statement under the Act or an exemption from the registration
requirements of the Act and any other applicable restrictions, in which event
the Registered Holder shall be bound by the provisions of a legend or legends to
such effect which shall be endorsed upon the certificate(s) representing the
Warrant Shares issued pursuant to such exercise. The Warrant
-3-
<PAGE>
Shares issued upon exercise thereof shall be imprinted with legends in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT THERETO UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SAID ACT AND COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAW, OR UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED."
4. Notices of Record Date. In case:
(a) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution (other than a dividend or
distribution payable solely in capital stock of the Company or out of funds
legally available therefor), or to receive any right to subscribe for or
purchase any shares of any class or any other securities, or to receive any
other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice, provided
that the failure to mail such notice shall not affect the legality or validity
of any such action.
-4-
<PAGE>
5. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such shares of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
6. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
7. Non-transferability of Warrants. This Warrant is not transferable
and may be exercised solely by the Registered Holder during his lifetime or
after his death by the person or persons entitled thereto under his will or the
laws of descent and distribution. Any attempt to transfer, assign, pledge or
otherwise dispose of, or to subject to execution, attachment or similar process,
this Warrant contrary to the provisions hereof shall be void and ineffective and
shall give no right to the purported transferee.
8. No Rights as Shareholder. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.
9. Change or Waiver. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
10. Headings. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
11. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Nevada as such laws are applied to
contracts made and to be fully performed entirely within that state between
residents of that state.
12. Mailing of Notices, etc. All notices and other communications under
this Warrant (except payment) shall be in writing and shall be sufficiently
given if delivered to the addressees in person, by Federal Express or similar
receipt delivery, by facsimile delivery or, if mailed, postage prepaid, by
certified mail, return receipt requested, as follows:
Registered Holder: To his or her address on page 1 of this Warrant.
-5-
<PAGE>
The Company: Infocast Corporation
One Richmond Street West
Suite 901
Toronto, Ontario M5H3W4
Canada
Attn: A.T. Griffis
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attn: Jeffrey S. Spindler, Esq.
or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be, the
delivery in person or by mailing.
INFOCAST CORPORATION
By: /s/ J.W. Leach
-----------------------------
Date: October 6, 1999 Name: J.W. Leach
Title: President
-6-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO: Infocast Corporation
One Richmond Street West
Suite 901
Toronto, Ontario M5H3W4
Canada
1. The undersigned hereby elects to purchase _______ shares of the
Common Stock of Infocast Corporation, pursuant to terms of the attached Warrant,
and tenders herewith payment of $________ in payment of the purchase price of
such shares in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of the Common Stock in the name of the undersigned.
3. The undersigned represents that it will sell the shares of Common
Stock only pursuant to an effective Registration Statement under the Securities
Act of 1933, as amended, or an exemption from registration thereunder.
___________________________________
(Name)
___________________________________
(Address)
___________________________________
___________________________________
___________________________________
(Taxpayer Identification Number)
[print name of Registered Holder]
By:________________________________
Title:_____________________________
Date:______________________________
-7-
SERVICE PROVIDER AGREEMENT MASTER TERMS
THIS SERVICE PROVIDER AGREEMENT ("Agreement") of these Master Terms ("Master
Terms") and any modules or Exhibits, is made as of the 9th day of December 1999
between SUN MICROSYSTEMS OF CANADA INC., with its address at 100 Renfrew Drive,
Markham, ON L3R 9R6 ("Sun"), and INFOCAST CORPORATION ("Contracting Party") with
its address at Suite 1220, 855 - 2nd Street SW, Calgary, Alberta T2P 4J7.
BACKGROUND:
A. Sun sells computer hardware and licenses software, as well as
support, consulting and educational services;
B. Service Provider wishes to license software and purchase
certain hardware and other information technology products and
certain support, consulting and educational services from Sun;
C. Sun and Service Provider comprise a number of separate
operating divisions and Affiliated Companies (as defined
below) and Sun and Service Provider recognize the benefits of
having a single contract structure for the sale and purchase
of Products (as defined below) and provision of Services (as
defined below) identified in any commercial price list of Sun
or its Affiliated Companies; and
D. The parties have agreed to a common set of terms as set out
below ("Master Terms") and to such Exhibits as may from time
to time be attached.
The parties agree as follows:
1.0 DEFINITIONS:
1.1. Service Provider means the Contracting Party and all subsidiaries
of Contracting Party which meet the following criteria:
a) subsidiary is located in Canada;
b) Contracting Party owns an interest of more than fifty
percent (50%) or has management control (as defined
by the ability to control the Board of Directors or
its equivalent);
e) subsidiary complies with the terms of this Agreement;
and
d) subsidiary has substantially the same name as the
Contracting Party or is identified to Sun in writing.
1.2. EQUIPMENT means the hardware components (may also be referred to
as hardware) of Products and includes the media on which Software is
loaded.
1.3. SUN PRODUCTS(S) or PRODUCT(S) means the Equipment sold to Service
Provider and/or the Software licensed to Service Provider under this
Agreement
1.4. SERVICE(S) means the consulting, educational and support services
provided to Service Provider under this Agreement.
1.5. SOFTWARE means the software program components of Products in
machine-readable or source code form and related documentation.
2.0 BINDING AGREEMENT
2.1 These Master Terms will apply to and bind any Service Provider
that purchases Products or Services or licenses hereunder and
each of Sun's operating divisions and Affiliated Companies
which executes an Exhibit to this Agreement. For the purposes
of this Agreement, an "Affiliated Company" means any entity of
which Sun owns more than 50%. Unless otherwise specified in
such Exhibit, the execution of an Exhibit by a Sun division
shall bind each Affiliated Company Worldwide with respect to
activity related to such division.
2.2 Separate contracts may be negotiated by each party's operating
divisions or Affiliated Companies, to address different types
of transactions undertaken between them, it being understood
that the parties will use, without change, as many of these
Master Terms as are reasonable in the circurnstanees.
2.3 This Agreement between Service Provider and Sun consists of
these Master Terms and any Modules and/or Exhibits which are
attached hereto or which reference these Master Terms. The
Master Terms describe the general terms by which Service
Provider may purchase Products and Services from Sun and Sun
delivers Products and Services to Service Provider. The
specific terms related to the purchase of Equipment, Software
and/or Services are described in the appropriate Product or
Service Module and/or Exhibits (collectively referred to as
"Modules"). Modules may be added or deleted from time to time
by agreement of the parties, but Service Provider is only
authorized to purchase Products or Services to the extent that
one or more applicable Modules is executed and in force.
3.0 ORDER OF PRECEDENCE
The provisions of any Exhibit will take precedence over any of these
Master Terms, to the extent that they are inconsistent.
4.0 TERM AND TERMINATION
This Agreement commences the later of the effective date set forth
below or the effective date of the first attached Module and will
continue until the expiration or termination of all attached Modules.
Either party may terminate the Agreement or any individual Module
immediately, in its discretion, by written notice: (a) upon material
breach by the other party, if the breach cannot be remedied; or (b) if
the other party fails to cure any material remediable breach within 30
days of receipt of written notice of the breach. Rights and obligations
under this Agreement and/or any Module which by their nature should
survive, will remain in effect after termination or expiration of this
Agreement.
5.0 PAYMENT TERMS
Prices and fees for Products and Services are exclusive of all shipping
and insurance charges, and do not include sales tax, value added tax or
any other tax based upon the value of Products and/or Services. Service
Provider is responsible for payment of all such charges and taxes.
Service Provider agrees to pay Sun any sums when due pursuant to the
applicable Exhibit attached hereto. Interest will accrue from the date
on which payment is due at the lesser of 15% per annum or the maximum
rate permitted by applicable law. Service Provider grants Sun a
purchase money security interest in Products which have not been paid
for, including all improvements, modifications, or replacements and
proceeds thereof. Service Provider further grants Sun the right to
execute all documents necessary to perfect this security interest. If
Service Provider's Schedules for provision of Service reference a
special discount based on a volume, multi-year service, or other
commitment, and Service Provider fails for any reason to meet that
commitment, Service Provider agrees to pay for discounts received by
Service Provider which are not earned by Service Provider. Discounts
given to Service Provider may not be applicable for new Products
supported by Sun.
6.0 CONFIDENTIAL INFORMATION
If either party desires that information provided to the other party
under an Agreement be held in confidence, that party will, prior to or
at the time of disclosure, identify the information in writing as
confidential or proprietary. The recipient may not disclose such
confidential or proprietary information, may use it only for purposes
specifically contemplated in this Agreement, and must treat it with the
same degree of care as it does its own similar information, but with no
less than reasonable care. These obligations do not apply to
information which: a) is or becomes known by recipient without an
obligation to maintain its confidentiality; b) is or becomes generally
known to the public through no act or omission of recipient, or c) is
independently developed by recipient without use of confidential or
proprietary information. This section will not affect any other
confidential disclosure agreement between the parties.
7.0 LIMITED WARRANTIES
7.1 Sun warrants Products and Services as specified in each
Exhibit.
7.2.a) Sun further warrants that specified versions of Products
identified on Sun's external Web site
(url:www.sun.com/y2000/cpl.html) as being Year 2000 compliant
("Listed Products") will not produce errors in the processing
of date data related to the year change from December 31, 1999
to January 1, 2000. Date representation, including leap years,
will be accurate when Listed Products are used in accordance
with their accompanying documentation, provided that all
hardware and software products used in combination with Listed
Products properly exchange date data with them.
7.2.b) Versions of Products identified on Sun's external Web site as
not yet compliant, but which are scheduled to be made
compliant, will become Listed Products when remedial
replacement parts, patches, software updates or subsequent
releases ("Y2K Fixes") are issued and properly installed. Y2K
Fixes for such Products will be issued no later than June 30,
1999.
7.2.c) Other Products are not covered by these warranties.
7.2.d) To the extent that Sun installs Y2K Fixes or performs other
Services under this Agreement for Service Provider, Sun
respectively warrants that:
(i) upon installation of the Y2K Fixes, Products will become
Listed Products; and
(ii) Services performed on Listed Products will not result in
them ceasing to be Listed Products.
7.2.e) Service Provider's sole and exclusive remedy for Sun's breach
of these warranties will be for Sun: (i) to use commercially
reasonable efforts to provide Service Provider promptly with
equivalent Year 2000 compliant products; or (ii) if (i) is
commercially unreasonable, to refund to Service Provider its
new book value for non-compliant Listed Products.
<PAGE>
7.3 UNLESS SPECIFIED IN THIS AGREEMENT, OR IN ANY EXHIBIT, ALL
EXPRESS OR IMPLIED CONDITIONS, REPRESENTATIONS AND WARRANTIES,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE OR NON-INFRINGEMENT ARE DISCLAIMED,
EXCEPT TO THE EXTENT THAT SUCH DISCLAIMERS ARE HELD TO BE
LEGALLY INVALID.
8.0 IMPORT AND EXPORT LAWS
All Products, Services and technical data delivered under this
Agreement are subject to U.S. and Canadian export control laws and may
be subject to export or import regulations in other countries. Service
Provider agrees to comply strictly with all such laws and regulations
and acknowledges that it has the responsibility to obtain such licenses
to export, re-export or import as may be required after delivery to
Service Provider.
9.0 AIRCRAFT PRODUCT AND NUCLEAR APPLICATIONS
Service Provider acknowledges that Products are not designed or
intended for use in on-line control of aircraft, air traffic, aircraft
navigation or aircraft communications; or in the design, construction,
operation or maintenance of any nuclear facility. Sun disclaims any
express or implied warranty of fitness for such uses.
10.0 INTELLECTUAL PROPERTY CLAIMS
Sun will defend or settle at its option and expense any legal
proceeding brought against Service Provider, to the extent that it is
based on a claim that Products (or the use of the replacement parts,
enhancements, maintenance releases, and patches ("Materials") provided
to Service Provider by Sun) directly infringe a copyright or a U.S. or
Canadian patent, and will pay all damages and costs awarded by a court
of final appeal attributable to such claim, provided that Service
Provider (i) gives written notice of the claim promptly to Sun; (ii)
gives Sun sole control of the defense and settlement of the claim;
(iii) provides to Sun all available information and assistance; and
(iv) has not compromised or settled such claim. If any Products or
Materials are found to infringe, or in Sun's opinion are likely to be
found to infringe, Sun may elect to: (i) obtain for Service Provider
the right to use such Products and/or Materials; (ii) replace or modify
such Products and/or Materials so that they become non-infringing; or
if neither of these alternatives is reasonably available, (iii) remove
such Products and/or Materials and refund Service Provider's net book
value for these Products and/or Materials. Sun has no obligation under
this Section 10 for any claim which results from: (i) use of Products
and/or Materials in combination with any equipment, software or data
not software or data not provided by Sun; (ii) Sun's compliance with
designs or specifications of Service Provider; (iii) modification of
Products and/or Materials; or (iv) use of an allegedly infringing
version of any Products and/or Materials, if the alleged infringement
could be avoided by the use of a different version made available to
Service Provider. THIS SECTION STATES THE ENTIRE LIABILITY OF SUN AND
EXCLUSIVELY REMEDIES OF SERVICE PROVIDER FOR CLAIMS OF INFRINGEMENT.
11.0 LIMITATION OF LIABILITY
11.1 Except for obligations under Section 10 (Intellectual Property
Claims), or breach of any applicable license grant, and to the
extent not prohibited by applicable law, each party's
aggregate liability to the other for claims relating to this
Agreement, whether for breach or in tort, will be limited to
the amount paid to Sun for Products, Services, or Materials
which are the subject matter of the claims. Liability for
damages will be limited in accordance with the foregoing and
consequential damages excluded even if there is a fundamental
breach of this Agreement.
11.2 Neither party will be liable for any indirect, punitive,
special, incidental or consequential damage in connection with
or arising out of this Agreement (including loss of business,
revenue, profits, use, data or other economic advantage)
however it arises, whether for breach or in tort, even if that
party has been previously advised of the possibility of such
damage.
12.0 FORCE MAJEURE
A party is not liable under this Agreement for nonperformance caused by
events or conditions beyond that party's control, if the party makes
reasonable efforts to perform. This provision does not relieve either
party of its obligation to make payments then owing.
13.0 WAIVER OR DELAY
Any express waiver or failure to exercise promptly any right under this
Agreement will not create a continuing waiver or any expectation of
non-enforcement.
14.0 ASSIGNMENT
Neither party may assign or otherwise transfer any of its rights or
obligations under an Agreement, without the prior written consent of
the other party, except that Sun may assign its right to payment,
assign an Agreement to an Affiliated Company, subcontract the delivery
of Services or Products, or any of these. If Sun elects to subcontract
Services or Product delivery, Sun will remain primarily responsible for
the-delivery of Services or Products.
<PAGE>
15.0 NOTICES
All written notices required by this Agreement must be delivered in
person or by means evidenced by a delivery receipt and will be
effective upon receipt.
16.0 SEVERABILITY
If any provision of this Agreement is held invalid by any law or
regulation of any government or by any court or arbitrator, such
invalidity will not affect the enforceability of any other provisions.
17.0 CONTROLLING LANGUAGE
The English version of this Agreement controls, regardless of whether a
translation into any other language is made.
18. SURVIVAL
Rights and obligations under this Agreement which by their nature
should survive, will remain in effect after termination or expiration
hereof.
19.0 GOVERNING LAW
Disputes which cannot be settled amicably will be governed by the laws
of the Province of Ontario Choice of law rules of any jurisdiction and
the United Nations Convention on Contracts for the International Sale
of Goods will not apply.
20.0 ENTIRE AGREEMENT
20.1 This Agreement is the parties' entire agreement relating to
its subject matter. It supersedes all prior or contemporaneous
oral or written communications, proposals, conditions,
representations lions and warranties and prevails over any
conflicting or additional terms of any quote, order
acknowledgment, or other communication between the parties
relating to its subject matte during the term of this
Agreement.
20.2 No modification to this Agreement will be binding, unless in
writing and signed by an authorized representative of each
party.
TO SIGNIFY THEIR AGREEMENT TO THESE TERMS, THE PARTIES HAVE CAUSED THIS
AGREEMENT TO BE SIGNED BY THEIR AUTHORIZED REPRESENTATIVES. THE EFFECTIVE DATE
OF THIS AGREEMENT IS_______________________.
SUN MICROSYSTEMS OF CANADA INC. INFOCAST CORPORATION
By:/s/ Joseph De Paola By:/s/ Darcy Galvon
------------------------------------- -----------------------------------
Name:Joseph De Paola Name:Darcy Galvon
----------------------------------- ---------------------------------
Title:MGR Financial Planning Title:Co-Chairman, Infocast Corp.
---------------------------------- --------------------------------
Date: December 19, 1999 Date:December 9, 1999
---------------------------------- ---------------------------------
-8-
<PAGE>
EXECUTIVE SERVICE PROVIDER ("SP") PROGRAM EXHIBIT
This Exhibit is effective on ____________________, 1999 ("Effective Date") by
and between SUN MICROSYSTEMS OF CANADA INC. ("Sun"), having a place of business
at 100 Renfrew Drive, Markham, Ontario L3R 9R6 and INFOCAST CORPORATION ("SP")
having a place of business at Suite 1220, 855 - 2nd Street SW, Calgary, Alberta,
T2P 4J7. This is an Exhibit to the Service Provider Agreement Master Terms
between the parties dated ________.
1.1 SCOPE
This Exhibit governs SP's authorization to purchase certain Sun Products
directly from Sun, and perform SP Services to SP's customers other than
governmental entities, departments, agencies and offices. Throughout the term of
this Exhibit, SP's primary business must be to provide facilities and/or
infrastructure for delivery of SP Services, including Web based applications and
IP services to Enterprise customers, consumers or other Service Providers. "SP
Services" are set forth in Attachment A. Authorized Sun Products and buying
locations are set out in Attachment B. In connection with the provision of SP
Services, SP will use Sun Products internally for purposes of providing the SP
Services. SP may not purchase Sun Products pursuant to this Exhibit unless those
Products are necessary for the provision of specified SP Services to SP's
customers or for SP's internal use. Unless SP is accepted into the "SunTone
Elite Program" and a Reseller Addendum is executed by Sun and SP, SP may not
resell Sun Product. If SP resells or transfers new or unused Sun Products to
third parties, this Exhibit will be terminated for material breach.
1.2 BUSINESS PLAN
SP must submit a Business Plan to, and which will be reviewed by, Sun. The
Business Plan will be attached to Attachment B. SP has represented to Sun that
the Business Plan accurately reflects the manner in which SP intends 1) to
utilize Product in conjunction with its SP services, 2) to market and support
Sun Products and 3) market SP's relationship with Sun. Either party may initiate
a review of the accuracy of SP's Business Plan upon thirty (30) days' Notice,
provided that Sun shall initiate no more than one review per calendar quarter.
13 ATTACHMENTS
The Attachments to this Exhibit may be modified only upon the mutual written
consent of the parties. The current version of each Attachments is attached to
this Exhibit and becomes a part hereof.
1.4 PRICES AND DISCOUNTS
SP's net price for Products or spare parts purchased and licensed under this
Exhibit shall be the price set forth in Sun's Canadian End User Price List at
the time SP's order is accepted, less a discount of twenty-seven (27%) on
Category A Products, twenty-two percent (22%) on Category B Products and nine
percent (9%) on Category H Products. Such discounts will not apply to those
Products which are listed as "non-discountable" in the appropriate price list,
nor may they be applied to exceed any listed maximum discount. Such discounts
will apply towards purchases of discountable spare parts, but such discounts
will not apply to purchases of training, installation (except where included in
the purchase price of the Products), consulting, repairs, maintenance work or
similar services and source code license fees. Each year, within thirty (30)
days of the anniversary of the Effective Date of this Exhibit, Sun will
determine SP's discount for the following year based on SP's (i) verifiable
purchases of Products from Sun and Sun authorized resellers during the current
term then ending and, (ii) Sun's then-current discount policies. Price lists and
discounts are subject to change at any time
1.5 SP DEVELOPMENT FUND ("SPDF"). This section governs SP accrual, use, and
reimbursement of SPDF.
a) SP will receive SPDF at a rate equal to one percent (1%) of
its net purchase of Sun Products from Sun directly.
b) Disbursement and use of SPDF shall be as follows: 50% Sun
technology; training, services 50% Marketing Initiatives
Page 1 of 10
<PAGE>
c) Any additional policies and procedures governing the SP's
reporting, use and reimbursement of SPDF will be set forth on
the SP web site, when it becomes available.
d) SP agrees to pay any and all such applicable taxes as set
forth in Section 1.19.
e) To be eligible for reimbursement, all expenditures must be in
Canada.
f) All claims for reimbursement must be received by the
designated co-op agency within 6 months from the accrual date.
Any funds not claimed during this time period will be
forfeited to Sun. SP shall be advised of unused funds at least
thirty (30) days prior to the forfeiture date.
g) Sun shall not be responsible in any way for the acts, errors,
or omissions of the designated co-op agency.
h) Failure to comply with any foregoing obligations will
constitute a material breach of this Exhibit.
1.6 COMPETENCY TRAINING
SP may enroll in Sun's Certification Training Program established for
Sun Service Providers as those classes are established from
time-to-time and set forth on the SP Web site: to be advised.
1.7 SP's OBLIGATIONS
a) SP shall provide monthly productivity status reports ("PSR")
as directed by Sun on the SP web site. If SP does not provide
Sun with PSRs as set forth on the SP web site, Sun may cancel
SP's Business Development Fund accruals and may terminate this
Exhibit.
b) Indemnity. Each party shall indemnify and hold the other
harmless from and against all third party claims for personal
injury or death, as may arise from the negligent performance
or non performance of its obligations under this Exhibit
c) Fair Representation. SP shall display, demonstrate and
represent Sun Products fairly and shall make no
representations concerning Sun or its Sun Products which are
false, misleading, or inconsistent with those representations
set forth in promotional materials, literature and manuals
published and supplied by Sun. SP shall comply with all
applicable laws and regulations in performing under this
Exhibit
d) SUN SPARC Only. SP shall not sell, lease, or otherwise deal in
any product based on SPARC Architecture, unless such product
(i) is a Sun Microsystems of Canada Inc. Product or (ii) is a
"laptop system". A product is a "laptop" system if it is (i)
transportable, (ii) battery operated, (iii) under sixteen (16)
pounds total weight including case, and (iv) packaged without
a CRT. SP is not prohibited by this Exhibit from selling any
product that does not contain the SPARC Architecture.
1.8 TERM AND TERMINATION
A. Term. This Exhibit shall commence on the Effective Date and
shall remain in force until the date established according to
the following schedule:
Effective Date: Expiration Date:
(of each following year)
March 1 - May 31 May 31
June 1 - August 31 August 31
September 1 - November 30 November 30
December 1 - February 28 February 28
It shall be automatically renewed on a yearly basis
thereafter, unless at least thirty (30) days prior to any
year's Expiration Date, Sun or SP tenders Notice of intention
not to renew.
Page 2 of 10
<PAGE>
B. Termination.
a) This Exhibit and/or any Exhibit hereto may be
terminated by either party (i) without cause, for any
reason, on ninety (90) days' Notice to the other
party, (ii) immediately, by notice, upon material
breach by the other party, if such breach cannot be
remedied; (iii) by Notice, if the other party fails
to cure any material remediable breach of this
Exhibit within thirty (30) days of receipt of Notice
of such breach, or (iv) immediately, by Notice, upon
the second commission of a previously remedied
material breach.
b) Sun may terminate this Exhibit immediately, by Notice
in the event of (i) the direct or indirect taking
over or assumption of control of SP or of
substantially all of its assets by any government,
governmental agency or other third party; (ii) Sun
discovers that SP has made a material
misrepresentation or omission in its SP Application;
and (iii) SP makes an unauthorized resale.
C. Effect of Termination.
a) Upon any termination or expiration of this Exhibit,
SP shall no longer be authorized to purchase Sun
Products. In the event of termination for cause, all
outstanding orders are subject to cancellation or
acceptance by Sun. Sun may repurchase and require SP
to sell to Sun any unused Sun Products in SP's
inventory at net invoice price.
b) Rights and obligations under this Exhibit which by
their nature should survive, will remain in effect
after termination or expiration hereof. Neither party
shall be liable to the other for damages of any kind,
on account of the termination or expiration of this
Exhibit in accordance with its terms and conditions.
1.9 NO EXPORT
SP agrees that it will not export Products outside Canada unless SP has been
accepted into Sun's Passport Program and has executed a Passport Exhibit to this
Exhibit. SP recognizes that (i) under the Passport Program, the prices it pays
and the discounts it receives may be different from those stated in this
Exhibit, and that purchases made outside Canada will be subject to local terms
and conditions, and (ii) Sun Enterprise Services will not be obligated to
provide Support Program Modules for services for Products exported hereunder.
1.10 TRADEMARKS LOGOS AND PRODUCT DESIGNS
"Sun Trademarks" means all names, marks, logos, designs, trade dress and other
brand designations used by Sun in connection with Products. SP may refer to
Products by the associated Sun Trademarks, provided that such reference is not
misleading and complies with the then-current Sun Trademark and Logo Policies.
SP shall not remove, alter or add to any Sun Trademarks, nor shall it co-logo
Product. SP is granted no right, title or license to, or interest in, any Sun
Trademarks. SP acknowledges Sun's rights in Sun Trademarks and agrees that any
use of Sun Trademarks by SP shall inure to the sole benefit of Sun. SP agrees
not to (i) challenge Sun's ownership or use of, (ii) register, or (iii) infringe
any Sun Trademarks, nor shall SP incorporate any Sun Trademarks into SP'S
trademarks, service marks, company names, internet addresses, domain names, or
any other similar designations. If SP acquires any rights in any Sun Trademarks
by operation of law or otherwise, it will immediately at no expense to Sun
assign such rights to Sun along with any associated goodwill, applications,
and/or registrations.
SP may use the Service Provider program logo only: (i) as shown in the artwork
provided by Sun; (ii) in pre-sale marketing materials and advertising, but not
on goods, packaging, product labels, documentation or other materials
distributed with Products; (iii) in a manner no more prominent than SP's
corporate name and logo; and (iv) otherwise in accordance with the then current
Sun Trademark and Logo Policies.
1.11 ORDERS AND DELIVERY
SP may submit written Product orders to Sun at any time. However, acceptance of
SP's Product orders will only be effective upon issuance of Sun's order
acknowledgment form. Any subsidiary of SP which is at least 50% owned by SP and
which desires to be an ordering location must agree to bound by the terms of
this Exhibit in writing and must be listed as an ordering location in Attachment
B to this Exhibit. Additional ordering locations may be added by written
request. Sun will use reasonable efforts to meet the delivery date(s) identified
on the acknowledgment
Page 3 of 10
<PAGE>
form. Unless otherwise specified on SP's order, Sun may make partial and invoice
each delivery. Such deliveries will not relieve SP of its obligation to accept
other parts of its order. Title to Equipment, and risk of loss of or damage to
Products, will pass to SP upon shipment by Sun, Ex Works Sun's product delivery
center. Products will be deemed accepted upon receipt by SP. Sun's product
offerings are continually evolving. Accordingly, Sun reserves the right to make
product substitutions and modifications that do not cause a material adverse
effect in overall product performance.
1.12 RESCHEDULING, RECONFIGURATION, AND CANCELLATION CHARGES
SP may reschedule, reconfigure, refuse or cancel the whole or part of any
Product order once, at no charge, provided the written request to do so is
received by Sun at least thirty (30) days prior to the scheduled delivery date
and, in the case of rescheduling or reconfiguration, the requested delivery date
is within thirty (30) days of the original delivery date. If an order for a
Product is rescheduled, reconfigured, refused, or cancelled at SP's request on
any other basis, or if Sun reschedules the Product order because SP fails to
meet an obligation under this Exhibit, Sun maycharge SP a restocking fee equal
to ten percent (10%) of the list price of the rescheduled, refused, reconfigured
or cancelled portion of the order.
1.13 PRODUCT UPGRADES
The list price of Product upgrades is based upon the return to Sun of specified
parts from system(s) being upgraded, as identified in the Sun Canadian End User
Price List. If Sun does not receive the specified parts within thirty (30) days
of upgrade delivery to SP, Sun will invoice SP for the non-returned parts. SP
agrees to pay Sun for such nonreturned parts the difference between the list
price of the purchased upgrade(s) and the list price of the upgraded system(s)
if purchased new.
1.14 RESALE OF EQUIPMENT:
a) INITIAL INTERNAL USE ONLY: Equipment purchased by Customer, at
the discounts provided under this Exhibit, is for the internal
use of Customer only, and may not be resold for a period of
twelve (12) months from the date of delivery, and may not be
resold as "new" at any Time. In the event that Customer
resells Equipment in violation of this provision, and in
addition to any other remedies available to Sun, Customer
agrees to pay to Sun, upon written demand, a sum equal to the
difference between the then current Sun U.S. End User Computer
Systems list price and the price actually paid for the resold
Equipment.
b) FUTURE RESALE CONDITIONS: In the event that Customer resells
Equipment in used condition at least twelve (12) months after
the date of delivery, Customer may transfer the associated
operating system Software license to the purchaser of
Equipment, provided Customer (i) executes and has the
purchaser of Equipment execute the Licensed Software Transfer
Notification/Exhibit (the "Transfer Exhibit") attached to this
Exhibit as Exhibit C and; (ii) returns an executed copy of the
Transfer Exhibit to Sun at the address therein specified.
1.15 PRODUCT WARRANTY
Product warranties may vary depending on the type of Sun Products purchased.
Applicable terms and conditions are as set out in the then-current Sun U.S. End
User Price List. Software provided with Product is warranted to conform to
published specifications for a period of ninety (90) days from the date of
delivery. Sun does not warrant that; (i) operation of any such Software will be
uninterrupted or error free; or (ii) functions contained in such Software will
operate in combinations which may be selected for use by the licensee or meet
the licensee's requirements. These warranties extend only to SP as an original
purchaser. Sun reserves the right to change these warranties at any time upon
notice and without liability to SP or third parties.
a) Limitation of Liability under Warranty: SP's exclusive remedy
and Sun's entire liability under these warranties will be: (i)
with respect to Equipment, repair or at Sun's option,
replacement; and (ii) with respect to Software, using
reasonable efforts to correct such Software as soon as
practicable after SP has notified Sun of such Software's
nonconformance. If such repair, replacement or correction is
not reasonably achievable, Sun will refund the purchase
price/license fee. Unless SP has executed an on-site service
Exhibit, repair or replacement will be undertaken at a service
location authorized by Sun. /
b) No Warranty: No warranty will apply to: (i) any and all
Software customization, such Software is provided "AS IS", and
"WITH ALL FAULTS"; or (ii) any Product that is modified
without
Page 4 of 10
<PAGE>
Sun's written consent or which has been misused, altered,
repaired or used with Equipment or software not supplied or
expressly approved by Sun.
1.16 BINARY CODE LICENSE
a) Grant and Restrictions: SP is granted a non-exclusive and
non-transferable license ("License") for the use of Software
provided with Product in machine-readable form and
accompanying documentation, by the number of users for which
the applicable fee has been paid. Software is copyrighted and
title to all copies is retained by Sun, its licensors or both.
SP will not make copies of Software or accompanying
documentation, other than a single copy of Software for
archival purposes and, if applicable, SP may, for its internal
use only, print the number of copies of on-line documentation
for which the applicable fee has been paid, in which event all
proprietary rights notices on Software will be reproduced and
applied. Except as specifically authorized below, SP will not
modify, decompile, disassemble, decrypt, extract, or otherwise
reverse engineer Software.
b) License to Develop: In the event that SP desires to develop
software programs which incorporate portions of Software
("Developed Programs"), the following provisions apply, to the
extent applicable: Developed Programs are to have an
application programming interface that is the same as that of
Software; fonts within such Software will remain associated
with their toolkit or server; Developed Programs may be used
and distributed, but only on computer equipment licensed to
utilize Solaris operating system software, unless an
additional Developer's License Exhibit has been executed by
Sun and SP; SP is not licensed to develop printing
applications or print, unless SP has secured a valid printing
license; incorporation of portions of Motif in Developed
Programs may require reporting of copies of Developed Programs
to Sun; and SP agrees to indemnify, hold harmless and defend
Sun from and against any losses, expenses, claims or suits,
including attorney's fees, which arise or result from
distribution or use of Developed Programs, to the extent that
such claims or suits arise from the development performed by
SP.
c) Confidential Information: Software is confidential and
proprietary information of Sun, its licensors, or both. SP
agrees to take adequate steps to protect Software from
unauthorized disclosure or use.
d) Termination: The License is effective until terminated. SP may
terminate the License at any time by destroying Software and
accompanying documentation and all copies thereof. The License
will terminate immediately upon Notice from Sun if SP fails to
comply with the terms of this License Section or the
Confidential Information obligations set forth above. Upon
termination, SP will destroy all copies of Software and
accompanying documentation.
1.17 OTHER GENERAL TERMS
a) Injunctive Relief. It is understood and agreed upon that,
notwithstanding any other provisions of this Exhibit, breach
of this Exhibit by a party may cause irreparable damage for
which recovery of money would be inadequate and that either
party shall be entitled to timely injunctive relief to protect
such party's rights under this Exhibit in addition to any and
all remedies at law.
b) Return Of Information. Upon the expiration or termination of
this Exhibit, each party will, upon the written request of the
other party, return or destroy (at the option of the party
receiving the request) all Confidential Information,
documents, manuals and other material specified by the other
party.
c) Headings. The paragraph headings appearing in this Exhibit are
inserted only as a matter of convenience and in no way define,
limit, construe, or describe the scope or extent of such
paragraph or in any way affect this Exhibit.
d) Acknowledgment. The parties hereto each acknowledges that the
provisions of this Exhibit were negotiated to reflect an
informed, voluntary allocation between them of all Asks (both
known and unknown) associated with the transactions
contemplated hereunder. The limitations and disclaimers
related to warranties and liabilities contained in this
Exhibit are intended to limit the circumstances and extent of
liability. The provisions of such sections (and this Section)
will be enforceable independent and severable from any other
enforceable or unenforceable provision of this Exhibit.
Page 5 of 10
<PAGE>
e) Reference Customer. Sun will be entitled to use SP as a
reference customer and to refer to SP in any materials in
which Sun's clients and customers are mentioned, subject in
each case to SPs prior approval. Either-party may use the
other's name and logos and related other trade marks, trade
names and service marks in connection with any such materials
with prior written approval of the other party.
f) Exhibits. The attached Exhibits may be modified only upon the
mutual written consent of the parties. The current version of
each Exhibit is hereby incorporated by reference.
TO SIGNIFY THEIR AGREEMENT TO THESE TERMS, THE PARTIES HAVE CAUSED THIS EXHIBIT
TO BE SIGNED BY THEIR AUTHORIZED REPRESENTATIVES. THE EFFECTIVE DATE OF THIS
EXHIBIT IS __________________________.
SUN MICROSYSTEMS OF CANADA INC. INFOCAST CORPORATION
By:/s/ Joseph De Paola By:/s/ Darcy Galvon
------------------------------------- -----------------------------------
Name:Joseph De Paola Name:Darcy Galvon
----------------------------------- ---------------------------------
Title:MGR Financial Planning Title:Co-Chairman, Infocast Corp.
---------------------------------- --------------------------------
Date: December 19, 1999 Date:December 9, 1999
---------------------------------- ---------------------------------
THIS HEADS OF AGREEMENT made this 17th day of December,1999
BETWEEN
InfoCast Corporation a company incorporated in Nevada with registered office at
Lisle, Illinios represented by Mr A. T. Griffis, Co-Chairman (hereinafter
referred to as "INFOCAST")
and
InfoCast (Australasia) Limited (ACN 090 413 200) a company incorporated in
Australia with registered office at 201 Great Eastern Highway, Belmont, WA 6104
represented by James David Taylor (hereinafter referred to as " IAL")
collectively known as the PARTIES
WHEREAS:
INFOCAST owns or is developing certain technologies, including licences and
software, as well as business, technical and marketing expertise in relation to
providing services in the fields of Application Service Provider (ASP) and in
particular Virtual Cell Centers (VCC), Teleworks and Distance Learning as
detailed in its Business Plan hereinafter referred to as the "Licensed
Technology".
WHEREAS:
IAL desires to license the Licensed Technology for development of business based
on the Licensed Technology in the Australasian region.
NOW THEREFORE in consideration of mutual promises and covenants the parties
agree as follows:
Article - Definitions
"Australasia" means Australia, New Zealand, the islands of the
Southern Pacific Ocean, China, Hong Kong, Vietnam, Cambodia,
Thailand, Laos, Singapore, Malaysia, Indonesia and the Philippines
"Licensed Region" means the region in which IAL has the rights to
develop the business of the Licensed Technology, which shall
comprise Australasia.
"Licensed Technology" means the licences and software, and business,
technical and marketing experience owned by INFOCAST in relation to
providing services in the fields of Application Service Provider
(ASP) and in particular Virtual Cell Centers (VCC), Teleworking and
Distance Learning as detailed in the INFOCAST Business Plan and
includes any future developments of refinements except New Rights.
"New Rights" means new technologies, whether owned or licensed, outside of the
areas defined in the Licensed Technology.
Heads of Agreement Infocast/Taylor Page 1
- --------------------------------------------------------------------------------
<PAGE>
Article 2 - Grant of License
2.1 To the extent permitted under its agreements with third parties,
INFOCAST shall grant the following exclusive license to IAL to:
i) develop and market the Licensed Technology in the
Licensed Region;
ii) enter into partnerships which are beneficial to the
development and marketing of the Licensed Technology;
` iii) transfer the Licensed Technology to a new corporation
("NEWCO") for the purpose of raising finance, expanding
the business of the Licensed Technology or increasing
the value of the Licensed Technology. Any rights or
obligations under this Agreement shall automatically
transfer from IAL to NEWCO and NEWCO will enter into a
new licensing agreement with INFOCAST.
IAL, NEWCO and any partnerships of IAL and NEWCO are prohibited from
offering to do business based on the Licensed Technology outside of
the Licensed Region.
Article 3 - Disclosure of Licensed Technologies
3.1 INFOCAST shall disclose the Licensed Technologies to IAL or NEWCO in
a timely fashion and shall not withhold any information. To the
extent permitted, any new developments or refinements which shall
mean new patents or technologies concerning the Licensed Technology
shall be disclosed to IAL for IAL to use in the Australasian region
and for the purpose of this Agreement shall become part of the
Licensed Technology other than New Rights.
Article 4 - Technical Assistance
4.1 INFOCAST shall provide IAL with technical assistance relating to the
development, marketing and implementation of the Licensed Technology
including its adaptation of a non-material nature to the
Australasian region. Such assistance shall include but not be
limited to sending INFOCAST personnel to the Australasian region on
an agreed basis, training IAL personnel in the North American
offices, access to manuals and marketing strategies and generally
providing assistance to ensure the successful implementation and
development of the Licensed Technology. The PARTIES acknowledge that
the technical assistance provided by INFOCAST is intended to train
and transfer the Licensed Technology to IAL's personnel including
assistance with marketing and shall not be construed as an offer to
run the business.
Article 5 - Consideration
5.1 For the disclosure and right to use the INFOCAST Licensed Technology
and for the ongoing technical assistance IAL shall pay to INFOCAST:
A) License Fee
Heads of Agreement Infocast/Taylor Page 2
- --------------------------------------------------------------------------------
<PAGE>
i) A First License Fee of US$250,000 payable nine months
after signing of this Agreement or at the completion of
capital raising where the net proceeds exceed
US$2,000,000, whichever occurs first.
ii) A second License Fee of US$250,000 payable 15 months
after the signing of this Agreement.
iii) An ongoing License Fee of US$500,000 every six months
starting 21 months after the signing of this Agreement.
iv) In the event that IAL completes a public fund raising
greater than Australian $5 million prior to 21 months
after the signing of this Agreement the ongoing license
fee in (iii) above will commence immediately and any
unpaid fees in (i) and (ii) above will be cancelled.
B) Royalty
A Royalty of 0.5 (one-half of one) per cent of revenue that is
derived from the sales generated from the INFOCAST Licensed
Technology during IAL' first year of operation and increasing to 1.5
(one and a half) per cent commencing in year two and each year
thereafter. The royalty will be capped to the extent that the
licensing fees and royalty payments will cumulatively not exceed 15
(fifteen) per cent of IAL' annual net profit after tax.
Notwithstanding this limitation, the semi-annual licensing fees of
US $500,000 will always be due and payable regardless of IAL' profit
margin. Equity
C Equity
After the setting up of the corporate structure in Australia and the
raising of the initial seed capital INFOCAST will own 20% (twenty
per cent) of the issued capital of the new corporate structure. At
any future capital raisings INFOCAST will have the right to maintain
its equity by contributing on the terms and conditions of the future
capital raising.
5.2 In the event that the payments made to INFOCAST are subject to
taxation and such taxes are required to be withheld from the payment
to INFOCAST then IAL shall withhold the tax from the payment to
INFOCAST provided however that IAL shall obtain the appropriate
certificates proving such tax payment and shall provide INFOCAST
with such certificates.
Article 6 - Report and Payment
6.1 IAL shall report in writing the revenue generated by IAL, and the
amount of royalty to be paid within thirty (30) days from the last
day of every half of calendar year (January 1st - June 30th; July
1st - December 31st) during the term of this Agreement and within
thirty (30) days from expiration or termination of this Agreement.
6.2 IAL shall pay the royalty to INFOCAST by the due date of each report
provided in Article 6.1 hereof. Such payments shall be made in US
dollars.
Heads of Agreement Infocast/Taylor Page 3
- --------------------------------------------------------------------------------
<PAGE>
Article 7 - Report and Audit
7.1 IAL shall maintain accurate books and records, which show the
revenue and keep them for two (2) years from the due dates of
royalty payments. IAL shall permit an independent accounting firm
designated by INFOCAST to audit aforesaid books and records as may
be necessary to confirm the royalty described in Article 5 hereof;
provided, however, such audit shall be performed during IAL's
ordinary business hours not more than once a year. INFOCAST shall
notify IAL of such audit with ten (10) days prior written notice.
Article 8 - First Refusal
8.1 Where INFOCAST, acting on its own or in any collaborative venture
with a third party:
(a) obtains New Rights; and
(b) wishes to license the New Rights,
INFOCAST must first offer to license the New Rights to IAL for the
Licensed Region on commercially reasonable terms.
8.2 Having regard to the provisions of Article 20.1 (which will ensure
that IAL has advance notice of emerging New Rights), any offer made
by INFOCAST under Article 8.1 will be open for discussion,
negotiation and acceptance for a period of sixty (60) days from the
date of the offer under Article 8.1 to IAL.
8.3 If any such offer under Article 8.1 is not accepted within sixty
(60) days, the offer will lapse and INFOCAST will be free to license
the New Rights to any party on terms no better than those offered to
IAL.
Article 9 - Term and Termination
9.1 INFOCAST shall have the right to terminate this Agreement in the
event that IAL becomes bankrupt or insolvent.
9.2 In the event that IAL has not achieved the following sales from the
INFOCAST Licensed Technology by the date shown:
- $10 million two years after INFOCAST achieves sales of $10
million;
- $20 million three years after INFOCAST achieves sales of $20
million;
- $40 million three years after INFOCAST achieves sales of $40
million;
then INFOCAST will have the right to license the Licensed Technology
for the Licensed Region to a second party who may compete with IAL.
Heads of Agreement Infocast/Taylor Page 4
- --------------------------------------------------------------------------------
<PAGE>
9.3 In the event either party ("Breaching Party") breaches any term or
condition of this Agreement, the other party (Non-breaching Party")
may terminate this Agreement if such Breaching Party does not
correct such breaches within sixty (60) days from the receipt of
written notice of breach given by the Non-breaching party; or
9.4 In the event that this Agreement is lawfully terminated by INFOCAST,
IAL will immediately lose all rights provided under this Agreement.
To the extent permitted, in the event that INFOCAST becomes
bankrupt, insolvent or any other similar situation, then IAL will
automatically have the rights to the Licensed Technology and
everything that has been disclosed previously.
9.5 In the event that IAL is solely prohibited from carrying on business
from any country in the Licensed Region then INFOCAST will have the
right to license the Licensed Technology to a second party who may
compete with IAL in that country.
Article 10 - Confidentiality
10.1 During the term of this Agreement, the parties hereto shall keep the
conditions of this Agreement confidential and shall not disclose to
any third party except in the following cases;
i) the party obtains prior written consent from the other party;
ii) disclosure is required by the competent governmental authorities;
iii) disclosure is required by applicable laws;
iv) disclosure is required for raising of finance; or
v) disclosure is necessary to be made to an attorney who represents the
disclosing party.
10.2 During the term of this Agreement, the parties shall keep the trade
secrets of the other party, including the Licensed Technologies,
disclosed by the other party, confidential and shall not disclose to
any third party except in the following cases:
(a) such disclosed information was already known to the
public at the time of the disclosure, or becomes public
through patent applications, publications or sales of
the products which utilise the Licensed Technologies;
(b) the disclosing party obtains prior written consent from
the other party for disclosure;
(c) such information was disclosed by the order of the
court, request of administrative agencies or in
accordance with the requirement under the laws;
(d) the disclosing party obtains such information from any
third party without owing any confidentiality
obligation; or
Heads of Agreement Infocast/Taylor Page 5
- --------------------------------------------------------------------------------
<PAGE>
(e) such information necessarily becomes public by the sales
of the Licensed Technology.
10.3 In case either party disclosed the conditions of this Agreement or
trade secret of the another party such disclosing party shall have
the other party bear the same confidentiality obligation as provided
in Articles 10.1 and 10.2 herein.
Article 11 - Representation and Warranty
INFOCAST represents and warrants the following:
i) INFOCAST is the legitimate owner of all rights, ownership and
interests of the Licensed Technologies;
ii) INFOCAST has the right to execute this Agreement; and
iii) There is no written, oral or implied transfer, permission, license,
mortgage, debt or agreement interfering with this Agreement.
Article 12 - Assignment
This Agreement or any right hereunder, in whole or in part, voluntarily or not,
except those anticipated by Article 2 shall not be in any case subject to
assignment or transfer by either party without prior written consent of the
other party, and such consent shall not be unreasonably withheld.
Article 13 - Communications
All communications required hereunder shall be in writing and shall be sent by
postage prepaid mail, courier, facsimile, telex or telegram addressed to the
other party to the above mentioned address or at any other address as may be
furnished to the notifying party in accordance with this Article. Each
communication shall be deemed to have been sufficiently given when the addressee
receives such communication from the notifying party.
Article 14 - Force Majeure
Neither party shall be liable to the other party for non-performance or breach
of any term or condition of this Agreement if such non-performance or breach is
caused by Acts of God, strikes, fires, floods, or restrictions by administrative
authorities or any other cause beyond the reasonable control of the party
including delay in the transfer or adaptation of the Licensed Technology to the
Licensed Region.
Article 15 - Arbitration
The parties hereto shall make best efforts to solve the disputes arising from,
relating to or in connection with this Agreement in amicable manners. In case
such disputes are not solved within ninety (90) days from occurrence of such
disputes, the disputes shall be, upon the application of either party, settled
by arbitration rendered by one or more arbitrators nominated in accordance with
the Arbitration Rules of the International Chamber of Commerce in Toronto. The
award to be rendered shall be final.
Heads of Agreement Infocast/Taylor Page 6
- --------------------------------------------------------------------------------
<PAGE>
Article 16 - Governing Law
This Agreement shall be governed by and construed in accordance with the law of
the Province of Ontario and the Federal Laws of Canada.
Article 17 - Entire Agreement
This Agreement constitutes the entire agreement between the parties concerning
the subject matters of this Agreement and supersedes all previous agreements and
other communications, whether in writing or oral.
Article 18 - Waiver
Any failure of either party to enforce, at any time or for any period of time,
any of the provisions of this Agreement shall not be construed as a waiver of
such provisions or of the right of the party thereafter to enforce each and
every such provision.
Article 19 - Severability
In the event that any provision hereof is found violating or inconsistent with
any law or regulation, both parties shall have a meeting to make necessary
amendment to this Agreement. The validity, legality and enforceability of any
provision hereof shall not be affected or impaired in any way by any holding
that any other provision or provisions contained herein are invalid, illegal or
unenforceable in any respect.
Article 20 - Improvements
20.1 Subject to the rights of any third party engaged in any
collaborative development program with INFOCAST the parties agree to
regularly exchange technical information about any improvements to
the Licensed Technologies developed by either of the parties.
20.2 If IAL develops any improvements to the Licensed Technologies, IAL
may apply for patent and technology protection of those improvements
in any countries; and
Article 21 - Definitive Agreement
21.1 The Parties agree that this Heads of Agreement shall be the basis
for a Definitive Licensing Agreement to be executed by the Parties
within three (3) months of the signing of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first above written by its duly authorised
representatives.
For and on behalf of For and on behalf of
INFOCAST CORPORATION IAL
/s/ A T Griffis /s/ James D Taylor
- --------------------------------------- -----------------------------------
Name: A T Griffis Name: James D Taylor
Heads of Agreement Infocast/Taylor Page 7
- --------------------------------------------------------------------------------
<PAGE>
Date: December 17, 1999 Date: December 17, 1999
-------------------------------- ------------------------------
Heads of Agreement Infocast/Taylor Page 8
- --------------------------------------------------------------------------------
MINUTES OF SETTLEMENT AGREEMENT
AMONG:
APPLIED COURSEWARE TECHNOLOGY, INC., a company formed
pursuant to the laws of the Province of New Brunswick,
(hereinafter called "ACT");
OF THE FIRST PART
- and -
GERARD COSTELLO, an individual resident in Fredericton, New
Brunswick,
(hereinafter referred to as "Gerard")
OF THE SECOND PART
-and-
FAYE COSTELLO, an individual resident in Fredericton, New
Brunswick,
(hereinafter referred to as "Faye")
OF THE THIRD PART
JOSEPH COSTELLO, an individual resident in Fredericton, New
Brunswick,
(hereinafter referred to as "Joseph")
OF THE FOURTH PART
-and-
<PAGE>
INFOCAST CANADA CORPORATION, a company formed pursuant to
the laws of the Province of Ontario
(hereinafter referred to as "Infocast Canada")
OF THE FIFTH PART
-and-
INFOCAST CORPORATION, a company formed pursuant to the laws of
the State of Nevada,
(hereinafter referred to as "Infocast U.S.);
OF THE SIXTH PART
RECITALS
WHEREAS ACT and Infocast Canada signed a letter of intent
dated February 10, 1999 (the "Letter of Intent") with regard to a proposed
transaction by which Infocast Canada would acquire 100% of the issued and
outstanding shares of ACT;
AND WHEREAS by share purchase agreement dated as of May 13,
1999 (the "Purchase Agreement"), Infocast Canada agreed to purchase and the
shareholders of ACT, including Gerard and Faye, agreed to sell all of the common
shares of ACT subject to certain terms and conditions;
AND WHEREAS pursuant to an escrow agreement made May 10, 1999,
the closing of the Purchase Agreement was held in escrow, pending due diligence
and the satisfaction of certain conditions;
AND WHEREAS the parties have been involved in a dispute
concerning whether those certain terms and conditions have been met, along with
other outstanding issues;
AND WHEREAS each of the parties hereto have expended
considerable time and effort to complete the terms of the Purchase Agreement;
AND WHEREAS ACT, particularly through the efforts of Gerard
and Faye, in order to comply with the conditions set out in the Escrow
Agreement, has substantially altered its business in efforts to complete the
Purchase Agreement, and as a result has foregone other business opportunities;
-2-
<PAGE>
AND WHEREAS the parties have agreed to settle their
differences with regard to the Purchase Agreement without admission of liability
on behalf of any of the parties, by implementing the provisions set out in this
Settlement Agreement;
NOW THEREFORE in consideration of the mutual covenants
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. The parties hereto acknowledge and agree that the Recitals are accurate and
form part of this Agreement.
2. Forthwith upon the execution of these Minutes of Settlement by all parties,
ACT, Gerard and Faye agree to return promptly, but in no event later than
January 7, 2000, to Infocast Canada or as it may further direct, the assets and
work in progress, as specifically set out in Schedule "A" attached hereto (the
"Assets"). Infocast Canada and Infocast U.S. agree and acknowledge that ACT,
Gerard and Faye may retain copies of and may continue to use and exploit the
intellectual property it contributed to the Learning Management System, Digital
Exchange Library and courseware production or conversion techniques.
3. Forthwith upon the execution of these Minutes of Settlement by all parties,
Infocast shall provide a certified cheque made payable to ACT, in the principal
sum of $100,000.00 as payment for the Assets and as re-reimbursement for
expenses incurred by ACT, Gerard and Faye relating to the Purchase Agreement.
4. Forthwith upon the execution of these Minutes of Settlement by all parties,
Infocast U.S. and Infocast Canada will deliver share certificates for an
aggregate of 200,000 shares of Infocast U.S. (the "Settlement Shares"), as
follows:
(a) a share certificate for 100,000 shares of Infocast U.S.,
registered in the name of Gerard; and
(b) a share certificate for 100,000 shares of Infocast U.S.,
registered in the name of Faye.
The parties acknowledge that the shares delivered to Gerard and Faye pursuant to
the provisions of these Minutes of Settlement are to be registered in the United
States and may be sold according to the provisions attached hereto as Schedule
"B". The Settlement Shares, prior to any sale according to the provisions of
Schedule "B", will be held by Weir & Foulds as escrow agent. In the event that
the provisions of Schedule "B" are not fully complied with by any party with
obligations and responsibilities thereunder (the "Defaulting Party"), then the
parties acknowledge that the Release received by the Defaulting Party and
exchanged under paragraph 5 of these Minutes of Settlement will have no further
force or effect.
-3-
<PAGE>
5. Forthwith upon execution of these Minutes of Settlement by all the parties,
each of the parties hereto shall each execute and exchange Releases, the forms
of which are attached hereto as Schedules "C" and "D" respectively.
6. Infocast Canada and Infocast U.S. herewith forgive the $140,000.00 Note dated
March 25, 1999 (the "Note") payable by ACT. The Release referred to in paragraph
5 above from Infocast U.S. and Infocast Canada hereby includes a release with
regard to any obligations under the Note, which Note is hereby forgiven in full,
with no further payment obligations in any manner whatsoever owing from any of
ACT, Gerard or Faye.
7. Each of the parties hereto agree to keep the terms of these Minutes of
Settlement confidential and represent and warrant that on and after December 30,
1999, they shall not disclose such terms to any other party, other than to legal
counsel, professional advisors, or as required by law, including, without
limitation, the securities laws of any province of Canada, the Republic of
Germany, or of the United States of America or the rules, regulations or
policies of the NASDAQ Stock Market, the Frankfurt Stock Market or any other
stock exchange or market where the shares of Infocast U.S. are listed or
Infocast U.S. has applied for listing, and each acknowledges to the other that a
breach of this confidentiality provision will entitle each of them and their
affiliates to immediate injunctive relief.
8. With respect to the subject matter of this Settlement Agreement, it is agreed
that this Settlement Agreement:
(a) sets forth the entire agreement between the parties hereto
relating to the settlement of all matters related to the
Purchase Agreement and any persons who have in the past or who
are now representing any of the parties hereto;
(b) supersedes all prior understandings and communications between
the parties hereto or any of them, oral or written; and
(c) constitutes the entire agreement between the parties hereto.
Each party hereto acknowledges and represents that this Settlement Agreement is
entered into after full investigation and that no party is relying upon any
statement or representation made by any other which is not embodied hereto. Each
party hereto acknowledges that he, she or it shall have no right to rely upon
any amendment, promise, modification, statement or representation made or
occurring subsequent to the execution of this Settlement Agreement unless the
same is in writing and executed by each of the parties hereto.
9. It is expressly agreed and understood that the executed copies of the
Schedules attached hereto are subject to the terms of this Settlement Agreement
and in particular, paragraph 5 herein.
-4-
<PAGE>
10. It is agreed and understood that this Settlement Agreement may be executed
by way of facsimile transmission and, further, may be executed in any number of
counterparts and all such counterparts shall, for all purposes, constitute one
agreement binding on the parties hereto, providing each party hereto has
executed at least one counterpart, and shall be deemed to be an original
notwithstanding that all parties are not signatory to the same counterpart.
DATED the 7th day of January, 2000.
SIGNED, SEALED AND DELIVERED ) APPLIED COURSEWARE
) TECHNOLOGY INC.
)
)
) Per: /s/ Gerard Costello
) --------------------
/s/ )
- --------------------------------- ) /s/ Gerard Costello
Witness ) -------------------------
) Gerard Costello
)
/s/ ) /s/ Faye Costello
- --------------------------------- ) -------------------------
Witness ) Faye Costello
)
) /s/ Joseph Costello
/s/ ) -------------------------
- --------------------------------- ) Joseph Costello
Witness )
)
) INFOCAST CANADA CORPORATION
)
)
) Per: /s/
) --------------------
)
) INFOCAST CORPORATION
)
)
) Per: /s/
) --------------------
-5-
FULL AND FINAL RELEASE
TO: INFOCAST CORPORATION
AND TO: INFOCAST CANADA CORPORATION
IN CONSIDERATION of the sum of ONE DOLLAR ($1.00) of lawful
money of Canada now paid by you to the undersigned (the receipt and adequacy of
which is hereby acknowledged by the undersigned) and for other good and valuable
consideration, the undersigned hereby remises, releases and forever discharges
you from all actions, causes of action, suits, debts, duties, accounts, bonds,
covenants, contracts, claims and demands whatsoever which the undersigned now
has or hereafter can, shall or may have for or by reason of or in any way
arising out of or in any way related tor referable to or connected with
(a) an agreement (the "Share Purchase Agreement") made in writing
and being dated the 13th day of May, 1999, between Infocast
Corporation, Infocast Canada Corporation, Applied Courseware
Technology Inc., Gerry Costello, Faye Costello, Joseph
Costello and Stephen Headford; and
(b) any agreements, documents and instruments relating to the
Share Purchase Agreement including, without limitation, the
Transaction Documents (as that term is defined in the Share
Purchase Agreement).
The undersigned represents and warrants that he has never
assigned or transferred, or purported to assign or transfer, any claim or right
which is based on or referable to any matter referred to or contemplated in any
either clause (a) or (b) in the preceding paragraph and which he has had or may
have had at any time up or on the date hereof against you, and covenants that he
will not assign or transfer, or purport to assign or transfer, any claim or
right which is based on or referable to any matter referred to or contemplated
in either clauses (a) or (b) of the preceding paragraph and which he has had or
may have had at any time up to or on the date hereof against you and that he
shall indemnify, defend and hold you harmless in respect of any such assignment
or transfer or purported assignment or transfer made by him.
The undersigned agrees not to make any claim or to commence or
maintain any proceedings against any person, firm or corporation in respect of
any matter, claim or cause of action existing at the date hereof which is based
on or referable to any matter referred to or contemplated in either clauses (a)
or (b) of the first paragraph hereof it such person, firm or corporation might
claim contribution or indemnity from you.
THE PROVISIONS hereof shall enure to the benefit of your
respective heirs, executors, administrators, legal personal representatives and
successors and shall be binding upon
<PAGE>
the respective heirs, executors, administrators, legal personal representatives
and successors of the undersigned.
AND IT IS AGREED that you do not by the payment aforesaid or
otherwise admit any liability to the undersigned and liability is, in fact,
denied.
IN WITNESS WHEREOF the undersigned individual has hereunto set
his hand and seal this 6th day of January, 2000.
SIGNED, SEALED AND DELIVERED )
in the presence of )
)
)
)
________________________________ ) /s/ Stephen Headford
Witness ) --------------------------
) Stephen Headford
-2-
SCHEDULE "D"
RELEASE
APPLIED COURSEWARE TECHNOLOGY INC., GERARD COSTELLO, FAYE
COSTELLO and JOSEPH COSTELLO (the "Releasors") in consideration of the sum of
TWO DOLLARS ($2.00) and other good and valuable consideration, the receipt and
sufficiency of which consideration is hereby acknowledged, do and subject to the
terms of a Settlement Agreement dated January 7, 2000, hereby remise, release
and forever discharge INFOCAST CANADA CORPORATION and INFORCAST CORPORATION (the
"Releasees") its officers, directors, employees, agents, successors and assigns
of and from all manner of actions, causes of action, suits, debts, dues,
accounts, bonds, covenants, contracts, claims and demands whatsoever which
against the said Releasees the Releasors ever had, now has or which its
successors or assigns, or any one of them, can, shall or may have for or by
reason of any cause, matter or thing whatsoever existing up to the date of this
release, whether known or unknown, and specifically including, notwithstanding
the generality of the foregoing, all claims or defences arising out of or
related to the Releasors' claims for damages under a Share Purchase Agreement
dated May 13, 1999 (the "Share Purchase Agreement") and an Escrow Agreement
dated May 13, 1999, and all other agreements, instruments and documents related
to the Share Purchase Agreement, including, without limitation, the Transaction
Documents (as that term is defined in the Share Purchase Agreement).
The Releasors further agree not to make any claims (including
any cross-claim, counter-claim, third party claim, action or application)
against any person or corporation who might claim contribution or indemnity
against the Releasees.
It is understood and agreed that the said payment is deemed to
be no admission whatsoever of liability on the part of said Releases.
<PAGE>
IN WITNESS WHEREOF, APPLIED COURSEWARE TECHNOLOGY INC. has
hereunto affixed its corporate seal under the hands of its proper signing
officers duly authorized in that behalf and GERARD COSTELLO and FAYE COSTELLO
have hereunto set their hands and seals in the presence of a witness this 7th
day of January, 2000.
APPLIED COURSEWARE TECHNOLOGY, INC.
Per: /s/ Gerard Costello c/s
-----------------------
/s/ /s/ Gerard Costello c/s
- ------------------------- -----------------------------
Witness GERARD COSTELLO
/s/ /s/ Faye Costello c/s
- ------------------------- -----------------------------
Witness FAYE COSTELLO
/s/ /s/ Joseph Costello c/s
- ------------------------- -----------------------------
Witness JOSEPH COSTELLO
-2-
RELEASE
INFOCAST CANADA CORPORATION and INFOCAST CORPORATION (the
"Releasors") in consideration of the sum of TWO DOLLARS ($2.00) and other good
and valuable consideration, the receipt and sufficiency of which consideration
is hereby acknowledged, do and subject to the terms of a Settlement Agreement
dated January 6, 2000, hereby remise, release and forever discharge APPLIED
COURSEWARE TECHNOLOGY INC., GERARD COSTELLO, FAYE COSTELLO and JOSEPH COSTELLO
(the "Releasees") their officers, directors, employees, agents, successors and
assigns of and from all manner of actions, causes of action, suits, debts, dues,
accounts, bonds, covenants, contracts, claims and demands whatsoever which
against the said Releasees the Releasors ever had, now has or which its
successors or assigns, or any one of them, can, shall or may have for or by
reason of any cause, matter or thing whatsoever existing up to the date of this
release, whether known or unknown, and specifically including, notwithstanding
the generality of the foregoing, all claims or defences arising out of or
related to the Releasors' claims for damages under a Share Purchase Agreement
dated May 13, 1999 and an Escrow Agreement dated May 13, 1999.
The Releasors further agree not to make any claims (including
any cross-claim, counter-claim, third party claim, action or application)
against any person or corporation who might claim contribution or indemnity
against the Releasees.
It is understood and agreed that the said payment is deemed to
be no admission whatsoever of liability on the part of said Releasees.
IN WITNESS WHEREOF, INFOCAST CANADA CORPORATION and INFOCAST
CORPORATION have hereunto affixed their corporate seals under the hands of its
proper signing officers duly authorized in that behalf this 7th January, 2000.
INFOCAST CANADA CORPORATION
Per:/s/ c./s
-------------------------------
INFOCAST CORPORATION
Per:/s/ c./s
-------------------------------
TERMINATION AGREEMENT
THIS AGREEMENT is made as of the 29th day of July, 1999.
B E T W E E N
CHEROKEE MINING COMPANY, INC., a
corporation incorporated under the laws of the State
of Wyoming,
(hereinafter called "Cherokee")
OF THE FIRST PART,
-and
INFOCAST CORPORATION, a corporation
incorporated under the laws of the State of Nevada,
(hereinafter called "Infocast")
OF THE SECOND PART.
WHEREAS Cherokee and InfoCast (formerly Grant Reserve
Corporation) entered into a pledge agreement made November 25, 1988 (the "Pledge
Agreement"), a copy of which is attached hereto as Schedule "A", pursuant to
which Cherokee agreed to pledge certain shares (collectively referred to as the
"Shares") of Madison Mining Corporation and Gold King Mines Corporation, among
other things, to InfoCast.
AND WHEREAS Cherokee and Silver Wing Co., Inc. ("Silver Wing")
have entered into an agreement for the purchase and sale of the Shares pursuant
to which Cherokee will receive, among other things, a Promissory Note from
Silver Wing for the principal amount of US$250,000.
AND WHEREAS in consideration of the termination of the Pledge
Agreement, Cherokee has agreed to assign the Promissory Note to InfoCast and pay
to InfoCast the sum of US$22,670;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration
of the premises and the mutual covenants and agreements of the parties
hereinafter contained, the parties hereto agree as follows:
<PAGE>
1. In consideration of the assignment by Cherokee to InfoCast of the Promissory
Note the Pledge Agreement is hereby terminated and shall have no further force
or effect as of the date hereof.
2. Each of Cherokee and InfoCast agree the Promissory Note dated November 23,
1998 in the principal amount of $600,000 issued by Cherokee to InfoCast is
hereby cancelled and of no force and effect.
3. Each of Cherokee, its officers, directors, servants, agents, successors and
assigns, and InfoCast, its officers, directors, servants, agents, successors and
assigns hereby remise, release and forever discharge each from the other from
any and all manner of actions, amounts owing, accruing, due or otherwise, causes
of action, suits, debts, duties, accounts, bonds, covenants, warranties,
contracts, claims and demands of every nature or kind arising out of or in any
way contained in or related to the Pledge Agreement.
4. InfoCast hereby agrees and consents to delivery of share certificates
representing the Shares to Silver Wing and the registration of the Shares in the
name of Silver Wing.
5. Any notice, document or other communication required or permitted by this
Termination Agreement to be given by a party hereto shall be in writing and is
sufficiently given if delivered personally, or if sent by prepaid ordinary mail
posted in Canada, or if transmitted by any form of telecommunication (which is
tested prior to transmission, confirms to the sender the receipt of the entire
transmission by the recipient and reproduces a complete written version of the
transmission at the point of reception) to such party addressed as set out on
the face page hereof. Notice so mailed shall be deemed to have been given on the
third business day after deposit in a post office or public letterbox. Neither
party shall mail any notice, request or other communication hereunder during any
period in which Canadian postal workers are on strike or if such strike is
imminent and may reasonably be anticipated to affect the normal delivery of
mail. Notice transmitted by a form of recorded telecommunication during normal
business hours on a business day (9:00 a.m. to 5:00 p.m. local time at the place
of receipt) shall be deemed to have been given on the day of transmission or, in
the case of notice transmitted outside of normal business hours shall be deemed
to have been given on the first Business Day after the day of transmission.
Notice delivered personally shall be deemed to have been given on the day it was
delivered. Any party may from time to time notify the others in the manner
provided herein of any change of address which thereafter, until changed by like
notice, shall be the address of such party for all purposes hereof.
6. The parties agree to execute and deliver to each other such further
instruments and other written assurances and to do or cause to be done such
further acts or things as may be necessary or convenient to carry out and give
effect to the intent of this Agreement or as any of the parties may reasonably
request in order to carry out the transactions contemplated herein.
7. This Agreement (including the Schedules hereto) sets forth the entire
agreement among the parties hereto pertaining to the specific subject matter
hereof and replaces and supersedes
-2-
<PAGE>
all prior agreements, understandings, negotiations and discussions, whether oral
or written, of the parties hereto, and there are no warranties, representations
or other agreements, whether oral or written, express or implied, statutory or
otherwise, between the parties hereto in connection with the subject matter
hereof except as specifically set forth herein. No supplement, modification,
waiver or termination of this Agreement shall be binding unless executed in
writing by the party to be bound thereby.
8. This Agreement shall be binding upon and shall enure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors, assigns and legal representatives.
IN WITNESS WHEREOF the parties have executed this Agreement as
of the date first above written.
CHEROKEE MINING COMPANY, INC.
Per: /s/
------------------------------
INFOCAST CORPORATION
Per: /s/
------------------------------
-3-
ASSIGNMENT OF PROMISSORY NOTE
THIS AGREEMENT is made as of the 29th day of July, 1999.
B E T W E E N
CHEROKEE MINING COMPANY, INC., a
corporation incorporated under the laws of the State
of Wyoming,
(hereinafter called the "Assignor")
OF THE FIRST PART,
-and
INFOCAST CORPORATION, a corporation
incorporated under the laws of the State of Nevada,
(hereinafter called the "Assignee")
OF THE SECOND PART.
WHEREAS the Assignor is the holder of a promissory note (the
"Promissory Note") issued by Silver Wing Co., Inc., (the "Maker") dated the 29th
day of July, 1999 for the principle sum of US$250,000 plus interest at a rate
per annum equal to the Prime Rate (as more particularly set out in the
Promissory Note);
AND WHEREAS the Assignor has agreed to assign all of its
right, title and interest in the Promissory Note to the Assignee;
AND WHEREAS capitalized terms not defined herein shall have
the meanings ascribed to them in the Promissory Note;
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration
of the sum of One Dollar in lawful money of the United States of America
(US$1.00) now paid by the Assignee to the Assignor (the receipt and sufficiency
of which is hereby acknowledged) and in consideration of the mutual terms and
covenants herein set forth, the parties hereto covenant and agree as follows:
1. The Assignor does hereby agree to assign, set over, transfer,
grant and convey to the Assignee all of its right, title and
interest in and to the Promissory Note.
<PAGE>
2. The Assignor represents and warrants to the Assignee that it
has full power and authority to assign the Promissory Note to
the Assignee.
3. The parties hereto further covenant and agree that they will
each execute such further and other documents and do all such
further and other things as may be necessary or requisite in
connection with this Agreement.
4. This Agreement shall enure to the benefit of the heirs,
executors, administrators, successors and assigns of the
Assignee and shall be binding upon the successors and assigns
of the Assignor.
IN WITNESS WHEREOF the parties have executed this assignment
as of the day and year first written above.
CHEROKEE MINING COMPANY, INC.
Per: /s/
---------------------------------
INFOCAST CORPORATION
Per: /s/ A.T. Griffis
---------------------------------
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,893,102
<SECURITIES> 0
<RECEIVABLES> 203,844
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 485,670
<PP&E> 2,756,172
<DEPRECIATION> (226,853)
<TOTAL-ASSETS> 30,027,256
<CURRENT-LIABILITIES> 1,949,879
<BONDS> 0
<COMMON> 0
0
22,371
<OTHER-SE> 21,153,287
<TOTAL-LIABILITY-AND-EQUITY> 30,027,256
<SALES> 0
<TOTAL-REVENUES> 258,147
<CGS> 96,880
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 24,272,869
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (24,111,602)
<INCOME-TAX> (881,605)
<INCOME-CONTINUING> (23,229,997)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,229,997)
<EPS-BASIC> (1.05)
<EPS-DILUTED> 0
</TABLE>
